5c - Understanding Reconciliations

Task F4 - Reconciliation Details have been pulled via API and validated

Understanding reconciliation details

{
    "id": "2f6877b7-78e1-446a-ba46-45dba86bfa25_20221129",
    "date": "2022-11-29",
    "status": "Successful",
    "statusComment": "wire - Nov 30, 2022 08:05 AM",
    "amounts": {
        "total": -2142.69,
        "purchases": -3445.04,
        "sales": 1248.44,
        "dividends": 0.04,
        "fees": 0,
        "other": -1.37,
        "offset": 55.24
    },
    "transferAmounts": {
        "currency": "USD",
        "payablesToDW": 3023.6,
        "receivablesFromDW": 880.91
    },
    "reconciliationBreakdown": {
        "JSON": "https://dwiw5wms1md2c.cloudfront.net/reconciliation_2f5937b7-78e1-469a-ba46-45dba86bha25_20221129.json?Policy=eyJTdGF0ZW1lbnQiOiBbeyJSZXNvdXJjZSI6Imh0dHBzOi8vZHdpdzV3bXMxbWQyYy5jbG91ZGZyb250Lm5ldC9yZWNvbmNpbGlhdGlvbl8yZjY5MzdiNy03OGUxLTQ0NmEtYmE0Ni00NWRiYTg2YmZhMjVfMjAyMjExMjkuanNvbiIsIkNvbmRpdGlvbiI6eyJEYXRlTGVzc1RoYW4iOnsiQVdTOkVwb2NoVGltZSI6MTY3MDAyMDY0MX0sIklwQWRkcmVzcyI6eyJBV1M6U291cmNlSXAiOiIwLjAuMC4wLzAifX19XX0_&Signature=KZaPd6XHa1S4cmc4xjq6CNW7jRTHD1wHnbgjxUtGxRDqXU9UNra8ydUnLcTYC6LoQ-zuubwRa4jUnE1DxM2clZi1UG8KhU7fVzyGOH9QigtAi654fBseXa2FN-YbqRrGkjhdnImbeNmLUCy519IN3mRp39cxud~m6GMSRDNs3zt2cTstxBGQGRx8KawI7JDFzNOUMTMS~uFcvnUqFcbQQchJlJCteZwekRx3TSFDIn8VSoj59bUmKhMBqqkakUYeJexUGQFW2rhyVFDGectAkjMlFVEDnMzRjHOzAKvZyu51-Q3XayiGLoZNStWXZtbePBM2vXGNcvxmQBDhwATF-w__&Key-Pair-Id=APKAIXQTF4AMU2MAR26Q"
    },
    "batchID": "f25gy518-a0d2-4903-9448-a8854fadf788",
    "partnerID": "2f6877b7-78e1-446a-ba46-45dba86bfa25",
    "created": "2022-11-25T13:13:58.979Z",
    "updated": "2022-11-30T13:05:05.503Z",
    "updatedBy": "637266bb-dc09-472f-8751-4b0g609ebece"
}

• When getting additional details for a reconciliation there are a few important properties that a Partner should take note of.
• purchases - total notional value of all buy orders
• sales - total notional value of all sell orders
• dividends - total notional value of all dividends paid out on settlement date
• fees - Schedule B fee's such as ACAT fees
• other - total notional value of all other charges such as commissions and SEC/TAF fees
• offset - amount withheld from settlement due to other trading activities
• date - the settlement date
• payablesToDW - amount of funds DriveWealth is expected to receive from the partner
• receivablesFromDW - amount of funds DriveWealth is expected to remit to the partner
• reconciliationBreakdown.JSON - a full JSON response of all transactions, including corporation actions, that make up the settlement broken down by account. The url has a 15 minute TTL.

[
    {
       "accountID":"7ac9c8ab-39ed-42bc-a950-02b22a20a859.1668983910873",
       "accountNo":"DBNC000019",
       "userID":"7ac9c8ab-39ed-42bc-a950-02b22a20a859",
       "amount":20.50,
       "offset":4.50,
       "total":16.00,
       "marginCall":false,
       "partnerID":"2f6937b7-78e1-446a-ba46-45dba86bfa25",
       "transactions": [
            {
               "amount":11.50,
               "finTranCode":"SSAL",
               "finTranID":"JK.ff0d4233-50c9-4d22-83a9-5b193286a256",
               "created":"2022-11-25T14:32:43.371Z",
               "orderID":"JK.b735e882-ed1b-461b-9bdc-f6fcb7e96f56",
               "orderNo":"JKUE065902"
            },
            {
               "amount":9.00,
               "finTranCode":"SSAL",
               "finTranID":"JK.ff0d3233-50c9-4d22-83a9-5d193286a256",
               "created":"2022-11-25T14:32:43.371Z",
               "orderID":"JK.b733d882-ed1b-461b-9bdc-f6fcb7e96f56",
               "orderNo":"JKUE065902"
            }
        ]
    },
    {
       "accountID":"8jx9c8ab-39ed-42bc-a950-02b22a20a859.1668983910873",
       "accountNo":"DBNC000057",
       "userID":"8jx9c8ab-39ed-42bc-a950-02b22a20a859",
       "amount":5.80,
       "offset":0,
       "total":5.80,
       "marginCall":true,
       "partnerID":"2f6937b7-78e1-446a-ba46-45dba86bfa25",
        "transactions": [
            {
                "amount": -5.80,
                "finTranCode": "SPUR",
                "finTranID": "GC.beec65a4-5365-4319-b450-fbd8e5e2060e",
                "created":"2022-11-25T14:42:43.371Z",
                "orderID":"JK.b733d882-ed1b-461b-9bdc-f6fcg4e96f56",
                "orderNo":"JKUE059902"
            }
        ]
    }
]

What's offset and why is it important?

In accordance with regulatory guidelines governing margin trading, DriveWealth calculates reconciliation figures on a rolling basis which ensures that customer accounts do not get systematically pushed further into a margin deficit than what's necessary. Offset is the mechanism by which reconciliation gets updated throughout the settlement cycle (T+2) based on the specific activities that are taking place in a customer's account. Both unsettled proceeds and dividends can be used as offset, here are some real life scenarios:

1. A sell of $500 in TSLA was executed on Monday, and a buy of $300 in AMZN was executed on Tuesday.
   • Offset would occur in this case as the AMZN purchase took place within the settlement cycle of the preceding TSLA sale. Therefore, $300 would be withheld from Wednesday's settlement to offset the settlement for Thursday.
2. A buy of $200 in MSFT was executed on Monday, and a sell of $200 in GE was executed on Tuesday.
   • Offset would NOT occur in this scenario as the purchase preceded the sale.

When reconciliation gets updated

• DriveWealth recommends that partners consume the reconciliations events to get notified of any changes in the reconciliation status through its lifecycle. Below are estimated times

• The reconciliation API details have been built to update every 15 minutes throughout the trading day.

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*Payment for payables to DriveWealth must arrive no later than 12pm ET on settlement day (T+2), therefore, it's imperative that Partner has the ability to effect a same day transfer, e.g. a Fed/SWIFT wire.

Settlement lifecycle in a snapshot

Margin Calls

Although leverage is not offered in a limited purpose margin account, it's still a margin account nevertheless. Therefore, if an account ends up in a debit balance (the aggregate value of purchases exceeds that of sales) at the end of a trading day, a margin call will in turn be issued. However, no restriction will be placed on the account by DriveWealth as the deficit is only temporary in nature and is expected to be fully covered via the reconciliation process.

Each individual margin call issuance will trigger an event for partner consumption. In addition, a daily aggregate report will be made available denoting all accounts that have been issued a margin call.

Task F5 Incorporate Daily Travel Rule File

In order to fulfill our AML responsibilities, DriveWealth will ask our partners to upload a file daily to a secure Sharefile location detailing, on an individual basis, where funds are flowing to and from. In most cases, the originating and beneficiary account will simply be the same wallet/bank account that each user maintains on the partner's platform.

Format may be .csv and the following fields must be included:

• account number
• date of transfer
• Transaction Type
• customer name
• customer address
• amount
• originating/beneficiary bank name
• originating/beneficiary bank address
• originating/beneficiary country destination