|WikiProject Business / Accounting||(Rated Stub-class)|
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I created the "Securities Reconcilement" section tonight as it differs from Banking reconciliation and is where I spend the majority of my time while at work. My motivation was that I had trouble finding information about the discipline before taking the position, so I hope to solve that by adding information to Wikipedia.
- Should this be listed on a separate page?
- Is it appropriate to include software systems for reconciliations?
This should be moved out of bank reconciliation as it is a separate topic.Edit
Similar to the process of verifying that bank accounts are in agreement, Custodian banks who hold securities for clients must also verify that the count of securities held at the bank matches the client's account(s).
There are many different types of security reconciliations, such as between an investment manager and the Custodian bank, Fund Accounting or between the Custodian bank and a depository (such as Euroclear or The Depository Trust Company)
Security reconciliations are usually either positional or transactional in nature. In both cases, the reconciliation is frequently conducted at the security identifier level, such as CUSIP, ISIN, or SEDOL.
In a positional reconciliation, the shares are counted between two parties and compared. If the counts match, then the position is said to be in balance. If the positions do not match, then it is considered "out of balance", also referred to as a "break".
In a transactional reconciliation, only the changes from transactions are applied to accounts. The reconciliation occurs by matching offsetting transactions between the two sides of the reconciliation. If a transaction cannot be properly matched with its counterpart, it is left open and referred to as an "exception".
A transactional reconciliation can be more accurate when trying to resolve exceptions. In a positional reconciliation, the only fact known is that the positions do not agree; in a transactional environment, all of the details are available to allow for more granular research.
In some locations, reconciliations are required for regulatory reasons.
Most positions are reconciled daily to reduce risk, though for situations where positions are illiquid or traded less frequently (such at OTC Derivatives), they might be reconciled weekly or monthly. —Preceding unsigned comment added by NilssonDenver (talk • contribs) 23:30, 23 October 2009 (UTC)