Overview

Most securities that accrue interest follow terms that remain constant throughout their tenors. However, some securities stipulate a scheduled change in the way interest accrues. Fixed-to-float bonds, for example, change from fixed rate to floating rate at a predetermined point prior to maturity. There are also total return swaps (TRS) where the spread above the floating rate change as frequently as daily. In other cases, there are market events that require a modification of the accrual terms, such as the transition from traditional interbank offered rates (LIBOR, EURIBOR, etc.) to risk-free rates (RFR) including SOFR and EONIA.

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The workflow is slightly different depending on whether you use RDC or Issue Viewer/SRM. The benefits of this method is that it does not require any additional updates to the SMF and you can set up the periods at inception. The downside is your SMF accrual terms will be stale as they always reflect the initial period.

RDC

1. Query for the security and open it in Edit mode
2. Click the SMF Earnings Time Period tab
3. Double-click the record with Begin Date = Issue Date of the security
4. Set End Date = one calendar day prior to effective date of the change
5. Click Save
6. Back in the SMF Earnings Time Period tab, click Add SMF Earnings Time Period
7. Enter accrual terms
8. Set Begin Date = effective date of the change
9. Click Save

Issue Viewer/SRM

1. Query for the security and select it in the results (do not open it)
2. Click the SMF Earnings Time Period tab in the lower section of the screen
3. Select the record with Begin Date = Dated Date of the security and click Change SMF Earnings Time Period
4. Set End Date = one calendar day prior to effective date of the change
5. Click Submit
6. Back in the SMF Earnings Time Period tab, click Add SMF Earnings Time Period
7. Enter accrual terms
8. Set Begin Date = effective date of the change
9. Click Save

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• If Dated Date is prior to Issue Date, you must also set Begin Date = Dated Date during step 4
• In Issue Viewer/SRM, you can edit multiple records at the same time by shift- or controlctrl-clicking the desired rows and then using Change SMF Earnings Time Period
• In the Classic UI, you can also access Add/Change/Delete/List Earnings Time Period through the main menu to perform these steps

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• All Versions
  • Editing an existing record through Issue Viewer or SRM where Begin Date is changed results in a new record being created, instead of the existing record being updated
    • The old record must be deleted when this happens
    • Tracked as SDP-34183
  • The records created by RDC based on SMF changes do not inherit Underlying Security (it is NULL)
    • In this case you must edit the records manually to populate Underlying Security
    • When Underlying Security is populated, the SMF Earnings Time Period tab shows its Security Alias instead of its Issue Name as shown in other screens
•  V17
  • Issue Viewer: updating a fixed income SMF results in an End Date = current date for the initial period, which will trigger an error if you try accrue through that date
    • In this case you must edit the initial record to set End Date = prior calendar date by following steps 1-5 above under Issue Viewer/SRMunder 
    • Swaps are unaffected as the initial record is updated correctly
    • Fixed in V17 R2.22
• V13 Custom
  • SRM: updating the SMF results in only the initial record being changed to reflect the new accrual terms, instead of the initial record being updated to include an End Date for the old terms and plus an additional record for the new terms
    • In this case you will have to add/edit records SMF Earnings Time Period records manually by following steps 1-9 above under Issue Viewer/SRM
    • This makes updating the SMF only useful for keeping the accrual data in sync with the most recent SMF Earnings Time Period record, not for maintaining the records
• V15
  • Issue Viewer and SRM both exhibit the same issues as described for in SRM above, which has two implications:
    • This makes updating the SMF only useful for keeping the accrual data in sync with the most recent SMF Earnings Time Period record, not for maintaining the records
    • All maintenance of the records must be done manually by following steps 1-9 above under Issue Viewer/SRM