BEST PRACTICES GUIDE
BNY Mellon Data and Analytics Solutions
Instrument Engineering Team
Last Update:
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OVERVIEW
Enhanced Income Securities (EISs) are hybrids with both common stock and bond components. They are exchange-traded and make periodic distributions consisting of dividends and interest. After a specified period, the underlying components can be separated and traded individually. This document is intended to provide a brief overview of current Eagle functionality that can be used to support EIS.
EIS
Initially the EIS acts similar to common stock, and should be set up as such in Eagle Accounting. It should be priced daily and dividends (distributions) can be generated using the corporate actions panels.
UNDERLYING SECURITIES
When the holder elects to split an EIS and trade its underlying pieces, the original position must be closed and new positions opened manually. A sell should be booked for the EIS, with buys booked for the underlying equity and fixed income securities.
Equity
The underlying equity is exchange-traded and should not require any special setup.
Fixed Income
The underlying fixed income has unique terms that require manual intervention. Calculations are outlined in the accompanying spreadsheet.
- Adjust interest rate: the user must supply Eagle Accounting with an interest rate = actual interest rate * minimum increment; face value will remain intact and accruals will be calculated correctly
- If the minimum increment changes over the fixed income’s life, a Coupon Type of Unscheduled Variable Rate can be selected to support different rates
- Set Price Multiplier = 1
NOTES
Yield calculations may not be meaningful due to adjustment of interest rate.Include Page