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Eagle does not have a specific module designed to support Portfolio Swaps, but a streamlined workflow can be implemented using the core TRS functionality. This involves setting up a separate TRS for each underlying portfolio constituent, then booking the equity activity directly against the TRSs to a given portfolio. Benefits include support for different spreads across equity constituents, automated corporate action processing, and eliminating the need to maintain a dummy entity that tracks the underlying equity portfolio. Refer to Instrument Engineering’s Total Return Swaps (TRS) Best Practices best practices for more information on general TRS lifecycle events and workflow.

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REFERENCE DATA

Storage & Configuration

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Market Data

Return leg payments are derived directly from the value of each underlying equity, whether paying or receiving the return. Equity prices must be entered directly on the TRS return legs (this is discussed in detail in the Valuation section). Corporate action processing can be automated starting in V17, but announcements must be created individually for each TRS return leg in lower versions. Refer to the Corporate Actions section below for details. 

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Unscheduled/Ad Hoc Resets

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TRADE PROCESSING

TRSs are traded based on a number of shares and a price, which allows the Portfolio Swap's underlying trading activity to be mapped directly to the associated TRSs. A batch of open trades is booked at inception to establish the initial values of the Portfolio Swap, all with the same trade/settle dates. These transactions will not create any cash settlements because TRS opens are cashless (unless there is an explicit fee, which can be entered if necessary).

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Valuation

Portfolio Swap valuation is based on pricing the return leg of each TRS with the underlying equity price. TRS are valued with market value equal to unrealized gain/loss. The sum of the TRS return leg valuations represents the total value of the Portfolio Swap.

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Reset Processing

Corporate Actions

REPORTING

STAR to PACE (S2P)

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Insurance Reporting

Data Management Reporting

PERFORMANCE

The performance toolkit calculates market value-based performance for individual Portfolio Swap TRSs at the return leg (price changes) and finance leg (accruals) levels using data supplied by the S2P process. However, this can be misleading because swaps use notional values and typically start with a market value of zero. Exposure-based analyses, which can be implemented using Eagle Enrichment, calculate more accurate returns. The documentation and .egl files for TRS enrichment are linked to Total Return Swaps (TRS) Best Practices. Additional details are available in the Exposure Reporting Best Practices and Eagle Enrichment User Guide 2015 documents.

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TRS prices must be loaded to the return leg only. Make sure you set tag 4590 = P or R in your price message depending on whether it is paying or receiving the return.

Sample messages to create a security, book an open, and book a close are attached to Total Return Swaps (TRS) Best Practices.