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Models and Allocations: Sync-on-Demand User Guide

Introduction

The mutual fund model sync-on-demand trading capability was implemented as a high-performance system specifically designed to process large sync requests for mutual funds in a very short period of time. This allows you to place trades close to the notification deadlines for the three mutual fund families supporting active/late day trading: ProFunds, Rydex and Direxion. We have established automated trade notification and verification interfaces with these fund companies to enable order placement as late as four minutes before the daily order entry cutoff time for the fund.

A sync-on-demand is triggered by pressing the Sync Now button on the model manager’s Sync Screen. Unlike the Sync in Regular Window option, orders will be generated immediately instead of placing them in the next available trading window. Because these orders can be placed very late in the day, sync-on-demand orders are currently not cancellable. The user interface for sync-on-demand is specifically designed to give the model manager sufficient warning before committing the sync to the order generation process.

If you do not wish to place orders using sync-on-demand or want to submit an order prior to 2:00 PM, click the Sync in Regular Window button and orders will be queued in the next regular trading window. There is no advantage to using sync-on-demand to generate orders for a model prior to 2:00 PM, and you preserve the right to modify/cancel the order if it is submitted to a regular window. Note that once any sync order is placed for a model containing mutual funds, you will not be able to place an additional sync-on-demand order for that model for the remainder of the day.

Enabling the Sync-on-Demand Option

Firms wishing to use sync-on-demand for qualified models must first notify customer service in order to enable this trading capability. Once granted, the ability to use sync-on-demand is firm-wide and not restricted to specific models. While all models will theoretically be eligible to participate, in practice only models meeting the criteria outlined below will successfully generate orders using the sync-on-demand mechanism.

Eligible Models

To use sync-on-demand, you must create models which meet the following criteria:

  • Models must contain only eligible mutual funds and/or FDIC.CASH.
  • A cutoff time has not passed for any eligible fund in a model.

Note: Individual Folios subscribed to a mutual fund sync-on-demand model that do not meet the above eligibility requirements will be dropped out of the order process (i.e., no orders will be generated for the Folio.) For example, if an invalid security (e.g., GOOG) was added by an advisor to a Folio subscribed to a sync-on-demand model, but the model itself is valid (i.e., contains only eligible funds), no orders will be generated for that particular Folio when it participates in a sync-on-demand. All other subscribed Folios meeting the eligibility requirements will have orders generated for them. You will receive an alert when a Folio does not participate in order generation because it is ineligible

How Do I Use It? – Generating Orders using Sync-on-Demand

After your firm has been granted access to the sync-on-demand feature, the Sync Screen for the model manager will contain a Sync Now button in a new section dedicated to this type of trading (see image below). The button will only be enabled two hours prior to the end of the trading day (usually 2:00 PM).

Model Sync Screen (during eligible timeframe)

Model Sync Screen

When an eligible model is synced using the Sync Now button, orders will be generated immediately and they cannot be cancelled. Because of this, when the Sync Now button is pressed, a confirmation notice (see image below) will always be displayed to inform you generated orders cannot be cancelled. You are explicitly prompted at this point to confirm your intention to submit the sync-on-demand order. If you click the Place Orders button, the model sync will generate orders if the model itself is valid. Clicking the Cancel button will return you to the model manager’s Sync Screen.

Sync-on-Demand Confirmation Notice

Sync-on-Demand Confirmation Notice

After the Place Orders button is pressed, the model is validated before orders are generated. If there are ineligible securities contained in the model, or any of the eligible mutual funds are past their order cutoff time, an Order Error screen will be displayed with the list of ineligible securities and/or a list of the funds past their cutoff time (see example below).

Sync Validation Error Screen — Ineligible Securities

Sync Validation Error

How Do I Fund Folios Subscribed to Sync-on-Demand Models?

All model-generated orders, including sync-on-demand, are rebalance only orders. You cannot add or remove money from a subscribed Folio when placing a model sync order. You can add or remove funds to/from a Folio subscribed to a sync-on-demand model in the same way you would any subscribed Folio. From the client’s account, either subscribe to the model or Prepare a window trade in the appropriate Folio. This initial order will be executed in the next regular window. It is recommended you modify the order so you purchase 100% FDIC.CASH. This provides complete flexibility for buys in the next sync in which the model participates. You can also buy or sell funds that are part of the subscribed sync-on-demand model.

An additional method to fund a sync-on-demand subscribed Folio is to simply transfer eligible securities into the Folio. Since they are sync-on-demand eligible funds, they will be able to participate in the next model sync. You can also transfer other securities into a sync-on-demand model but they must be sold in a regular window (with the proceeds invested in FDIC.CASH or sync-on-demand eligible mutual funds) prior to the Folio participating in the sync-on-demand trading process. Note: it may take up to three days for trades to settle and the cash proceeds to become fully available.

Important Information Regarding Mutual Funds in Models

Many mutual funds have different settlement dates than other securities, typically settling in one day (T+1). Most other securities settle in 3 days (T+3). When trading securities in a model, please remember that selling T+3 securities in order to purchase T+1 securities within 3 days may result in an order being cancelled for insufficient funds (unless other cash or cash equivilent securities are available to cover the T+1 purchases). Click here to display a list of mutual funds available for trading that includes the number of days needed for purchase/sale settlement.

Please be sure that mutual fund trades in models meet the fund’s minimum initial and/or subsequent purchase requirement. In the event a mutual fund minimum is not satisfied, the money for that investment will be spread out evenly among the remaining securities in the model. Click here to view the minimum initial and subsequent investment levels required by the Mutual Funds currently available for purchase.

If you have questions, please call the FOLIO Advisor team at 1-888-485-3456 prior to placing your orders.

Other Important Notes

  • Orders can only be placed using sync-on-demand by initiating a sync via the model manager interface.
  • It is possible in rare instances for a sync-on-demand to pass initial validation but fail during order generation if a cutoff time for one of the included securities is reached while the system is generating orders for the sync. In this case all orders associated with the sync will be automatically cancelled and you will receive an alert.
  • If you attempt to trade an ineligible model or you try to trade after a fund cutoff time, you will receive an error message. You may then either change the model holdings to make it eligible (assuming you have time to make such a change), or post the order for the next regular window.
  • The cutoff time for sync-on-demand for a given fund is generally four minutes prior to the mutual fund family’s order entry cutoff time. This four minute period is required to evaluate and generate orders for all subscribed Folios and to communicate with the participating fund companies to satisfy their notification and verification requirements. This time window can change without prior notice if fund family protocols change.
  • Allocation syncs will be executed in the regular window, not using sync-on-demand. If you sync an allocation that results in money being moved into or out of a sync-on-demand Folio, the order will execute in the next regular window.
  • We will make best efforts to acquire executions for orders generated by sync-on-demand. However, given mutual fund family policies, we cannot guarantee orders will be executed. In addition, we cannot guarantee orders transmitted by us will reach mutual fund families prior to their cut-off times if there are technical problems with our network carriers or the Internet in general. If an order is not executed for any reason, we will notify you as soon as practical.