On 10 October 2023, the Dutch Central Bank (De Nederlandsche Bank, DNB) published a news item on its website clarifying the calculation of the so-called K-COH and K-DTF under the Investment Firms Regulation (IFR). The news item is published in response to the European Banking Authority’s Q&A regarding the calculation of the K-COH.
In its news items, DNB has drawn attention to the fact that the approach used by certain investment firms to calculate the K-COH (which refers to ‘client orders handled’) and K-DTF (which refers to ‘daily trading flow’) is incorrect.
According to DNB, for the purpose of calculating the K-COH, the COH is the rolling average of the value of the total daily client orders handled, measured throughout each business day, over the previous six months, excluding the three most recent months.
Therefore, the calculation of COH for the reference date 30 June 2023 would exclude the months of May, April and March, but would include the months February, January and December.
According to DNB, a common mistake made by investment firms is that they would calculate the K-COH with a reference date of 30 June 2023 over the months March, February, January, December, November and October (i.e., the six months prior to the first three months of the reference date that must be excluded for the calculation of the K-COH).
DNB notes that the methodology for the calculation of the K-COH, as described above, also applies to the calculation of K-DTF (daily trading flow). In addition, DNB expects that in-scope investment firms will correctly report to DNB on the K-COH and K-DTF in respect of the third quarter of 2023.