Tax Functionality in eRecs

A brief review of changes in eRecs to support tax settlement in Atlantis

Starting March 18th 2019, Atlantis will begin allowing firms to electronically settle tax in addition to the brokerage fees that have been accrued. Firms do not have to settle tax however this feature is offered to all participants. This document will provide information for the impact on eRecs firms and processing for tax settlement.

What will Tax Look Like in Atlantis?

For complete documentation on this, we recommend reviewing the materials that the Atlantis team has presented over the last several months. However, here are some highlights regarding the updated fields related to tax:

• Tax Rate
  • Can be added by the Receiving Broker using the amend functionality in Atlantis
  • Tax Rate is applied and displayed as a percentage
  • Receiving Brokers must populate it manually, via excel upload, User Interface or API
    • There is no automation or way to build rules yet
• Tax Country
  • Optional field used to indicate to your counter party why you're charging the chosen tax percentage
  • Two-letter ISO code of the country charging the tax
  • Note: there is no validation in Atlantis that checks that the Tax Rate and the Tax Country correspond to each other
• Tax Amount
  • The value amount of the tax to be charged
  • Firms do NOT enter this.  Atlantis calculates it:
    • Tax Rate * Fee Amount
  • Note: Tax Amount currency will automatically always be the same currency as the Fee Amount currency
• Fee Amount
  • The brokerage amount
• Total Amount
  • Equal to Fee Amount + Tax Amount
  • This is the total amount that will ultimately settle in Atlantis

How Can I Submit Tax Information From My Internal Data into eRecs?

The above fields will feed from Atlantis into eRecs. In order to reconcile, eRecs will also need tax information from your internal books. This is provided using fields 44, 45, and 46 of the daily trade file you send to FIA Tech, reproduced below:

 Note, when submitting tax to eRecs, the fields will behave as follows:

• Tax Rate: if firms provide only Tax Rate, eRecs will compute the Tax Amount by multiplying the Tax Rate * Fee Amount.
• Tax Amount: if firms provide only Tax Amount, Tax Rate will remain blank.
• Tax Amount & Tax Rate: No calculation, tax amount calculated internally and tax rate displayed as a percentage as provided by firm. If an invalid value is provided, where Tax Rate * Fee Amount does not equal Tax Amount, priority will be given to the provided Tax Amount. In that scenario, Tax Rate will be left blank.

Tax and eRecs Match Levels

Below is a simplified example of this additional data on the reconciliation screen.

Columns in green will be included as part of our matching criteria – FeeAmount of course is already used, but eRecs will add TaxAmount to all existing match levels as well. TaxRate will be populated on the external trade, as this is the tax input that Atlantis will accept. The tax rate will be visible on the internal if the firm submits this value. If a trade does not have a tax component on both the external and internal lines, then there is no change.

eRecs will be adding ten new match levels to both receivables and payables matching:

• Tax Diff
• Tax Diff (M2M)
• Tax and Price Diff
• Tax and Price Diff (M2M)
• Tax and Fee Diff
• Tax and Fee Diff (M2M)
• Tax and Fee and Price Diff
• Tax and Fee and Price Diff (M2M)
• Tax and Fee and CCY Diff
• Tax and Fee and CCY Diff (M2M)

Receiving Brokers Can Update the Atlantis Tax Rate from eRecs

Receiving Brokers are able to update the Atlantis TaxRate through the eRecs bulk upload functionality. The following template can be found in a firm's reporting portal.

TEMPLATE _ATL-RCV-TAXAMD-USER-testfile1

Atlantis trade amendment to the TaxRate with an optional free text comment field. Tax rate is applied as a percentage in decimal form. When updating the tax rate the system will calculate a Tax Amount by multiplying the Tax Rate times the Fee Amount. The Tax Amount will take the currency of the current Fee Amount. There is also an option to revert the adjusted tax rate in this template. The extTradeKey is the eRecs assigned tradekey. The action is AMEND.

Both Receiving Brokers and Paying Brokers can Adjust their Internal Tax Rate in eRecs

Receiving Brokers and Paying Brokers can adjust internal tax rates through the bulk upload function. The following templates for TaxRate updates can be found in the firm’s reporting portal.

TEMPLATE _INT-RCV-TAX-USER-testfile1

This template requires the internal trade key. Internal trade line adjustment to the intTradeTaxRate with an optional free text comment field. Tax rate is applied as a percentage in decimal form. When updating the tax rate the system will calculate a Tax Amount by multiplying the Tax Rate times the Fee Amount. The Tax Amount will take the currency of the current Fee Amount. The intTradeKey is the eRecs assigned tradekey for the internal trade. The action is AMEND.

TEMPLATE _INT-PAY-TAX-USER-testfile1

This template requires the internal trade key. Internal trade line adjustment to the intTradeTaxRate with an optional free text comment field. Tax rate is applied as a percentage in decimal form. When updating the tax rate the system will calculate a Tax Amount by multiplying the Tax Rate times the Fee Amount. The Tax Amount will take the currency of the current Fee Amount. The intTradeKey is the eRecs assigned tradekey for the internal trade. The action is AMEND.

What should I do as a Receiving Broker if the Tax Amount is incorrect?

Atlantis trades on CBTS markets may already have a Tax Rate and Tax Amount applied because the the Tax Rate was added by the Clearing Broker who submitted these trades into Atlantis. As the Receiving Broker, you can choose to amend the Atlantis Tax Rate through the eRecs bulk upload functionality. Directions on how to amend the Atlantis Tax Rate is explained above.

What should I do as a Paying Broker if the Tax Amount is incorrect?

Paying Brokers can only reject the Total Fee Amount.  Therefore a user at a Receiving Broker must reject the entire trade with a reject reason of BLANK.  Once the Paying Participant rejects the trade, the  Reviewer will update to be the Receiving Broker, thus it will be up to the Receiving Broker to amend and re-affirm the trade as needed.

Future Enhancement: Auto-Amend of Tax Rate

NOTE: This is a proposed FUTURE change, it will NOT be going live with the above content. At a future date, we plan for eRecs Auto-Amend Tax Rate from the internal trade line when the trades are matched at a Tax Diff Level.