SD-06.5 — Trade Allocation
Business Domain: BD-06 Trading & Execution (Front office) · Applies: PUB
Purpose
Fairly distributes executed trades — especially block and partially-filled trades — across the accounts and funds that participated in them. When orders from many accounts are aggregated into a block and executed together, the fills must be allocated back so that no account is favoured: every participant receives the average price and a pro-rata share of costs. Trade Allocation owns that distribution and the conflict-of-interest discipline it enforces.
Service Operations
- Declare the pre-trade allocation statement — record the intended allocation before the block is executed.
- Calculate the allocation — distribute the fills pro-rata, at the average execution price with pro-rata costs.
- Handle partial-fill allocation — allocate a block that filled only in part across its participating accounts.
- Enforce the allocation policy — apply the allocation rules that prevent cherry-picking and fee- or performance-driven allocation.
- Handle allocation exceptions — the de-minimis, rounding and odd-lot cases.
- Maintain the allocation audit trail — the record that evidences fair allocation, and the conflict-of-interest monitoring.
Inputs and outputs
- Inputs: the executions from SD-06.2; the participating accounts and the block from SD-06.1; the allocation policy.
- Outputs: the per-account allocations, at the average price with pro-rata costs — consumed by BD-12 for confirmation and settlement — and the allocation audit trail.
Entities
- Consumes: PB-04 Execution (SD-06.2), Portfolio / Mandate (E-03); the SD-06.1 participating accounts and the block.
- Owns: PB-05 Allocation — the public-markets trade-lifecycle pack’s Allocation entity. SD-06.5 is its authoritative source
Standards
- The SEC Advisers Act aggregation conditions — average price, pro-rata costs, no account favoured — and the CFA Institute Asset Manager Code; the firm’s written trade-allocation policy.
Open extensions
- The cross-trade case — allocating a trade that crosses between two of the firm’s own accounts.
- The interaction with SD-14.2 Corporate Compliance & Conduct on the conflict-of-interest discipline — personal-account dealing and conflicts sit in BD-14.