On agency transactions, how does the commission impact the price used to calculate the yield?
The yield you report must be inclusive of commissions charged. The yield is a corollary of price. This means that when you incorporate the commission charged into the price for yield calculation, you must SUBTRACT the commission on BUY trade reports, and ADD the commission on SELL trade reports. Example: Firm XYZ receives an order from a customer to sell 100 bonds. Acting as the customer’s agent, XYZ sells the bonds to ABC. Although, technically the customer sold the bonds to ABC with XYZ acting as their agent, the reports from XYZ would be made as follows: Report #1: XYZ BUY 100 bonds from C as Agent @ 98 and charged .125 commission Report #2: XYZ SELL 100 bonds to ABC as Agent @98. In the example above, the price that would be used for yield calculation in Report #1 would be 98 MINUS .125 or 97.875. In a transaction involving an executing broker and an introducing broker, how is commission reported? Both the executing and the introducing broker must be represented in the trade report
