What is a deal ticket?
23rd of july 2015
Thursday, woke up early as usual and got to the office at 7:45am. My system had already been installed on tuesday,and even though it was an old system pulled from their stores,I was still very happy that I would be doing something meaningful with my time. So off to working on the system. My senior colleague sent deal tickets to my outlook email and came to explain how I would do it and then gave me treasury bill instruction forms and money market instruction forms to key into the deal tickets sent to me.
Sending of deal tickets to our Custodian and the bank to purchase the negotiable instrument happens every day. We are a large investment fund and investment decisions are taken every time. We seek to capitalize safe investments for our retiree fund by investing in mostly fixed income securities. This is because of the low risk appetite of retirees as a result of their age and the immediate need of their money. The RSA fund however is invested in Private equity, REITS, stocks and fixed income securities. We pretty much prepare deal tickets for each of the investments we want to make. So you see that i am being given a key role as a corper…lol..
Lets talk more about the deal ticket. Deal ticket is a ticket that records all the terms, conditions and basic information of a trade agreement. In my case, It is an instruction from the pension fund on buy or sell orders on treasury bills (usually Federal Government of Nigeria’s treasury bills) invest, rollover or terminate order on money market instruments, investments in private equity and more. It is in msword format. Previous deal tickets were contained there and I was told not to delete any for audit purposes or confirmation. I would use ctrl +f to search for previous histories on the bank to carry out the deals and attention to the banks. For treasury bill orders,I would fix in the order date,settlement date, then the units,discounts and amount to be settled,then the interest rates to be given, the issue date, and maturity date.
For money market instruments, invest, reinvest/rollover or termination orders would be made and sent to the bank in charge of the instruments. For investing, money would be authorized by the pension fund for the custodian to release money to the banks or financial institutions helping them with the purchase of the investments. For a rollover, interests are collected and saved with the pension fund custodian and the principal is rolled over and reinvested. For termination, instruction are given to the bank to sell the Instruments and transfer the money to the specified bank account by the pension fund.
NB: The pension fund administrator and the Pension fund custodian work hand in hand for their mutual success. The pension fund administrator makes the decision on what to invest in,and the amount to be released for investment. The pension fund administrator also sends payment instructions to the pension fund custodian for the release of money to pay retirees.
The pension fund custodian is the institution that houses the physical cash. They act on the direction received from the pension fund administrator. In my PPA,the pension fund administrator collects 1.6% of the AUM and the custodian gets 0.5% of the AUM. The regulatory body, Pencom also gets a share of the AUM. These charges are for the services rendered in managing the funds of both working class clients and the retirees.