PROCESSING NOTES

BNY Mellon Data and Analytics Solutions

Instrument Engineering Team

Last Update: 20 Sep 2019

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OVERVIEW

This document applies to all releases of Eagle software V12 and above. This documents covers the details of Dual Currency functionality.

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Dual Currency functionality only works for fixed income and bilateral swaps (without variation margin). It does not work for cleared swaps (with variation margin).

ENTITY SETUP

Entities trading Dual Currency securities do not require any special setup.

REFERENCE DATA

Market Data

When loading FX rates for Dual Currency Securities, it is critical they be added as Bid (4477), Ask (947), or Last (96) rates as defined in FX Rate Type (11817) on the security setup.

Security Data

The security master fields listed below are used to drive Dual Currency functionality for eligible securities.

• Asset Currency (85): currency in which the security will accrue and be valued
• Settlement Currency (63): default trade settlement currency, which can be overridden at trade time
• Income Currency (1186): currency in which coupon payments will settle
  • Cannot be changed between pay periods
• Dual Currency Indicator (11802) = Yes
• Dual Currency Conversion Factor (11803): stores the initial FX rate at issuance to convert the local currency to settlement currency
• Principal Currency (11813): currency in which the security pays principal
  • Currency in which corporate actions and maturities will settle
  • Must match either Asset Currency or Income Currency
  • Cannot be changed between pay periods
• Settlement Rate Option (11816): FX source to convert local amounts into settlement currency
• FX Rate Type (11817): defines which FX fixing rate to use from the Settlement Rate Option; valid options are Ask (A), Bid (B), and Last (L)
• FX Fixing Period Multiplier (12027): number of periods to look back or forward; can be negative or positive, but cannot be set to zero or null
• FX Fixing Period (11818): length of the fixing period (Day, Week, Month, or Year), also referred to as lookback days
• FX Fixing Period Date Type (12028): defines if the fixing period uses B (Business) or C (Calendar) days
  • Business can only be used if FX Fixing Period = Day
  • Calendar is used by default when FX Fixing Period = Week, Month, or Year
• Fixing Business Day Convention (12029): used in conjunction with FX Fixing Period to determine how the date is adjusted if it falls on a non-business day
  • Following: adjusts the fixing date to the following business day
  • None: if FX Fixing Period Date Type is set to Business, this field shows the value as None, and if Calendar is selected, it must be a value other than None
  • Preceding: adjusts the fixing date to the previous business day
• FX Fixing Business Center (12340): when FX Fixing Period Date Type = Business, this field identifies the business calendar used to calculate fixing period start and end dates
• FX Fixing Date Relative To (12341): specifies which date is the anchor for selecting FX rates
  • Payment Date: for income and principal payments, all the FX fixing parameters are applied to settlement date
  • Calculation End Date: fixing parameters are applied to the last accrual date of a coupon period, or the effective/termination date of the principal transactions

TRADE PROCESSING

Trades are entered using Book Trade, similar to any other fixed income securities. In case of swap transactions when the Settlement Currency (63) does not equal local currency, Settlement Amount (64) must be entered manually.

ACCOUNTING

Once a Dual Currency security position has been established it will follow all core Eagle Accounting processes.

OTHER NOTES

If Principal Currency is different than Asset Currency, the security will calculate principal in the Asset Currency, and convert local currency amounts to Principal Currency at the time of the maturity or any corporate action. All the calculations will be based on the parameters defined. Include PageINSTRUMENTENG:Best Practices End PageINSTRUMENTENG:Best Practices End Page