This component of the Framework discusses how the entries in the Knowledge Base metadata tables direct the processing of the transaction elements stored in the Data Structures.

The Processing Rules are grouped by function category, as described below.

Transaction Operations

This category addresses what is commonly thought of as the securities business transactions: buys, sells, repos and reverses, loans, etc. It also includes operations such as cancellations, corrections, and repricings. The various forms of trade settlement are an important component of this area. Journal entries are discussed as well.

These operations can either be performed manually or as part of an automated process.

See Transaction Operations for a thorough discussion of these topics.

Positions and Balances

There are a number of topics to consider in the management of the firm's positions and balances. Initially there are the level/accounts that will be used and how the values will be organized. A related topic is Date Bases, which include trade date and settlement date basis, among others.

We will also look at position accounting, particularly for trader positions and the stock record. See Positions and Balances for full details of the associated processing rules.

Profit & Loss

Accurate computation and reporting of profit & loss is absolutely key to any transaction processing system. It is also an area that can seem very complex, which is one reason why systems use widely varying approaches. If approached from within the Framework, however, it emerges naturally and has a straightforward implementation.

We will discuss the following components of P&L:

• Realized P&L
• Unrealized P&L, including amortization and accretion
• Dividends
• Bond interest
• Loan and repo interest
• Cost of carry

See Inventory and Trading P&L for a discussion of realized and unrealized P&L. Dividends and Interest is an overview of these two topics, with links to detailed pages on each.

Open Item Generation

It is useful to have the application generate certain transactions automatically. Examples are coupon interest receivable/payable and bonds maturing.

Housekeeping

Every system has certain housekeeping functions that have to be performed. The Framework discussed here has fewer than usual (particularly for end-of-day), but we will still look at topics such as purging history, managing future periods, and closing out P&L accounts to retained earnings.

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