Calendar Service for Open Ended Fund

This guide provides a comprehensive overview of how issuers can automate the price assignment to investor orders based on the token valuation, facilitated by the seamless integration of the calendar system.

Through this feature, users gain unparalleled control over critical financial operations, including subscription orders, redemption orders, and other time-sensitive procedures. Specifically tailored for open-ended funds such as mutual funds, hedge funds, and ETFs, this feature is purpose-built for entities keen on transitioning their settlement infrastructure to the blockchain.

Glossary

NAV: Net Asset Value represents the valuation of the underlying fund at a specific point in time. It is calculated by adding the total value of the fund’s assets, subtracting its liabilities, and dividing this figure by the number of outstanding shares.

Cut-off Time: Marks the deadline for Order processing on a given trading day. The Cut-off Time is established in the Fund Prospectus. Instructions regarding a transaction in Fund Shares must be received by the Fund or its Authorized Agent prior to the cut-off time in order to receive the Net Asset Value calculated for that trading day. After this time, new Order will be processed the following trading day and existing Orders can no longer be canceled.

Order Creation Date (sometimes called Order Date): The date and time when the Order is instructed by the investor.

Trade Date: The date and time when the Order is processed by the issuer (in this case the Fund or its Authorized Agent). If the Order Creation Date is after the Cut-off Time, the Trade Date will be the following business day.

Valuation Date: The date and time used to determine the value of the underlying fund (in this case, the NAV of the fund) for the Order Price.

Settlement Date: The date and time the Order is finalized where the investor has completed the purchase and the issuer has delivered the asset(s) to the investor.

Order Interval: The number of days between the Valuation Date and the Trade Date

Settlement Interval: The number of days between the Settlement Date and the Trade Date

Use-Case For Open-Ended Funds

Open-ended funds are a type of financial vehicle wherein individuals or institutions invest capital with the expectation of generating a positive ROI. These are subject to the volatility of any market, akin to the public markets, as many funds are composed of these types of assets.

Operational framework: 

• Open-ended funds are structured to issue and redeem tokens (or shares) continuously, based on investor demands.

• New investors can subscribe to a token (purchase shares), and existing investors can redeem their tokens (or shares by requesting) at the net asset value (NAV) at the end of each trading day. 

• There is no limit to the number of tokens that can be issued.

Order creation process:

• Investors seeking to invest in the fund must create a subscription order before the trading day concludes.

• The trading day concludes at the cut-off time, which is set forth by the fund prospectus (i.e. 3:00 PM).

• Orders submitted after the cut-off time are accepted but are assigned the NAV announced at the end of the trading day.

Pricing mechanism:

• Investors transact shares at the NAV. It is calculated by summing the total value of the fund's assets, subtracting its liabilities, and then dividing this figure by the number of outstanding shares.

• The NAV of open-end funds is computed at the close of each trading day, with the calculation process potentially causing a delay in price assignment to orders.

Getting started

Prerequisites

Before incorporating the Calendar Service, it's imperative to meet the following prerequisites:

• Ensure the existence of an open-ended subscription and/or redemption configuration in your token smart contract.

• Compile a list of non-working days for the year, encompassing national and banking days.

• Define the operational days of the week when the market is open (i.e. Monday to Friday).

• Select the cut-off time and the delay in order to have efficient order processing.

Configuration

Contact your CSM agent with all the prerequisites defined, and establish to which subscription and/or redemption you want to link the calendar, and it will be set for you.

Step-by-step Guide

Lifecycle Of The Token With a Calendar Linked

Step 1: Subscription order creation:

The investor creates an order, defining the Net investment in one of the many payment options. payment currency. Investors can also create the order by Amount to pay, meaning that the fees are included in the amount

• The calculation of token quantity is contingent upon the publication of the token valuation (NAV).

• Investors retain the ability to cancel orders until the cut-off time on a working day when orders undergo processing by the issuer.

Step 2: Payment processing

Investors execute payments through either bank transfers or cryptocurrency transactions from their wallets.

• Bank transfers necessitate manual reconciliation by the issuer.

• Cryptocurrency payments are automatically settled.

Step 3: NAV announcement, Price Assignment and Token Quantity Calculation

The issuer publishes the NAV of the token, derived from the underlying asset.
Subsequently, the orders adopt the valuation per token as the price, and the final token quantity for the order will be calculated

All Orders of a given trading day processed before the cut-off time are executed based on the NAV published on the Valuation Date.

Step 4: Minting the tokens

Once the order has defined all the parameters (Confirmed payment, Token quantity, and Token price), the issuer mints the tokens directly to the investor's wallet.

Step 5: Redeeming the tokens

If the issuer decides to enable it, investors now have the option to redeem their tokens in exchange for fiat currency. The corresponding amount is transferred to the investor's bank account, and the tokens representing shares are systematically burned.

• The price assignment for redemption orders aligns with the NAV schema established for subscription orders.

Frequently Asked Questions

How is the NAV application depending on the delay?

Example delay T+0

Example delay T+1

Example delay T+2