How to calculate K-AUM, K-CMH, K-ASA, K-COH and K-DTF

Investment firms that do not qualify as a 'small and non-interconnected investment firm' have an own funds requirement that is made up of, among other things, the K-factors from the Investment Firm Directive (IFR). For the calculation of K-COH (client orders processed), a Q&A has been published on the website of the European Banking Authority that clarifies the relevant time period for the calculation of the K-factor COH. This Q&A also covers the calculation of the K-factors AUM, ASA, CMH, COH and DTF.

Months in scope

In accordance with Article 20 of the IFR, COH for K-COH must be calculated as the moving average of the total daily orders processed by clients, measured over each working day of the six preceding months with the exception of the three most recent months. According to Article 20 of the IFR, K-COH is calculated on the first working day of the month in question. This means that, for example, on December 31 of a year, the K-COH as calculated on December 1 must be taken into account.

What we still see is that, for example, in the fourth quarter report of any year (i.e. with reference date 31 December), investment firms designate as the three most recent months (which are to be left out in these K-factors calculations) the months of December, November and October. This is not correct. The EBA Q&A makes it clear that – in order to determine the 3 most recent months – counting must be done from the 1st day of the reporting month. In the case of a fourth quarter report, the 3 most recent months are therefore November, October and September. This means that the months in scope for K-COH in a fourth quarter report are the months of August, July and June. For K-DTF, for example, these are the months of August – March.

Calculation

The average should be calculated by dividing the sum (of the processed orders in the case of K-COH, or of the daily transaction flow in the case of K-DTF) of the period in scope (see above) by the number of working days/trading days of that period.

Below is an example for clarification with regard to both the scope and calculation based on the K-DTF data to be filled in on the IFREP tab I06.12. Explanation on how to fill in the K-DTF tabs (I06.12 and I06.13) is also included in 2025-04-15 Handboek Rapportages IFREP class 2.

Example

The following rules apply to the correct completion of tab I06.12 (the average daily trading flow for months t, t-1 and t-2)

Determining the months in scope

The correct calculation takes into account the nine most recent months from the first working day for each of the 3 months t (month of the reference date), t-1 and t-2, whereby the most recent three months should then be left out of scope. In the example of an IFREP report with the reference date of 31 December, the first working day from which the prior nine most recent months should be derived for the month t is therefore 1 December. The months in scope for the month t therefore are August 2024 – March 2024.

The following months are therefore not included in the calculation of the average DTF for month t:

• December (t)
• November (t-1)
• October (t-2)
• September (t-3)

The following 6 months are included in the calculation of the average DTF for month t:

• August t/m March

Regarding the months t-1 en t-2 the correct scope is:

• t-1: July t/m February
• t-2: June t/m January

Calculation

The average should be calculated by dividing the relevant sum of the cash and derivatives transactions of the period in scope (see above) by the number of working days/trading days of that period. To illustrate, the following is a fictitious example with regard to the reporting reference date of 31 December (in which the cash and derivatives transactions have been added together for convenience):