Total return swaps are similar to interest rate swaps. However, instead of exchanging different rates, the total return swap exchanges an interest rate for the change in valuation of an underlying security. This is typically an equity. At predetermined reset dates, the change in valuation is calculated into a cash payment/receipt. The current price of the underlying security of the return leg is used to reset the notional for the next valuation period.
To set up a total return swap, you must configure your Eagle environment to allow duplicate Primary Asset IDs. You can use the Create Security Cross Reference Configurations panel in Reference Data Center (RDC).
Add Total Return Swap Contracts
To manually add a total return swap contract, pay leg, and receive leg:
- In Accounting Center, in the left navigation pane, click Setup > Securities > Manage Securities > Issue Viewer.
You see the Issue Viewer tool. - Click the Add arrow.
- Point to Derivatives and click Total Rate Return Swap.
You see the Total Rate Return Swap panel. - Add the contract on the Multiple Leg Swap panel.
The following fields are required to set up the contract: Issue Name, Primary Asset ID Type, Primary Asset ID, Issue Country Code, Asset Currency, Settlement Currency, Income Currency, Issue Date, Dated Date, Maturity Date, First Payment Date, Last Payment Date, and Calculate/Validate Last Payment Date. - Click the second row of the multi row pane at the bottom of the panel and add the pay leg.
The following fields are required to set up the pay leg: Issue Name, Primary Asset ID Type, Primary Asset ID, Issue Country Code, Asset Currency, Settlement Currency, Income Currency, Coupon, Coupon Type Code, Day Count Basis, Payment Frequency Code, Issue Date, Dated Date, Maturity Date, First Payment Date, Last Payment Date, and Calculate/Validate Last Payment Date. - Click the third row of the multi row pane at the bottom of the panel and add the receive leg.
The following fields are required to set up the receive leg: Issue Name, Primary Asset ID Type, Primary Asset ID, Issue Country Code, Asset Currency, Settlement Currency, Income Currency, Coupon, Coupon Type Code, Day Count Basis, Payment Frequency Code, Issue Date, Dated Date, Maturity Date, First Payment Date, Last Payment Date, and Calculate/Validate Last Payment Date. If the leg is floating, the following fields are also required: First Rate Reset Date, Reset Frequency Code, Reset Look Back Days, and Underlying Security ID. If the leg is a return leg, Underlying Security ID. is required as well. - Click Submit.
You can manually add a coupon/reset schedule for the equity and finance legs prior to resetting the total return swap. See the Manage Schedules section. Otherwise, if you do not manually add a reset schedule, the system calculates the payment dates for you using Security Master File information in a manner similar to that used to calculate a coupon for a bond.
Change Total Return Swaps
Some fields are locked when there is an existing position on the security. This is because a change would impact the existing position. These fields include Asset Currency, Investment Type, Processing Security Type, Quantity Type, Price Multiplier, and Quantity Scale. Other fields are locked so they cannot be changed. See the About Locked Security Master Record Fields in Issue Viewer page for more information.
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If you need to change a security master record, Eagle recommends canceling the security, making changes to the security master record, and rebooking the security. |
To manually change a total return swap:
- In Accounting Center, in the left navigation pane, click Setup > Securities > Manage Securities > Issue Viewer.
You see the Issue Viewer tool. - Enter the query parameters and click Search.
You see a list of security records that meet your selection criteria in the Query Result window. - Select the security record you want to update, click the Change arrow, and click Change Swaps. Or double-click the security record.
You see the Change Swaps multiple leg swap panel. - Change the options on the Change Swaps panel.
- Click Submit.
Multiple Leg Swap Panel Options
The following are the options in the Multiple Leg Swap panel. Note options may vary according to your selections.
Option | Tag | Description |
|---|---|---|
SRM Status Flag | ||
Release Status | 614 | Displays the release status of the Security Reference Manager (SRM) record. This field is null when adding a new security. |
Authorize Flag | 11742 | Flags records that have been authorized. |
Validation Process Flag | 4569 | Flags records that have been reviewed in the Security Reference Manager (SRM). |
Swap Information | ||
Swap Type | 4590 | Indicates the type of swap you are adding. Options include:
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Issue Name | 961 | Specifies the name of the security. |
Issue Description | 962 | Describes the security. |
Primary Asset ID Type | 1432 | Specifies the primary asset identifier type for the security, such as CUSIP, ISIN, and SEDOL. |
Primary Asset ID | 14 | Specifies the primary asset identifier for the security. |
Alt Asset ID Type | 5501 | Specifies an alternate asset identifier type for the security. |
Alt Asset ID | 1795 | Specifies the alternate asset identifier for the security. |
Swap Xreference Identification | ||
Unique Product Identifier (UPI) | 1955 | Specifies the Unique Product Identifier (UPI) that identifies the security issue. |
Unique Swap Identifier (USI) | 1958 | Specifies the Unique Swap Identifier (USI) that identifies the security issue. |
Reuters | 1961 | Specifies the Reuters identification number that identifies the security issue. |
Swap Details | ||
Investment Type | 11 | Specifies the investment type. For example, DERV. |
Processing Security Type | 3931 | Specifies the code value that the system uses to identify a security and determine what type of processing to perform. Options include:
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Security Type | 82 | Specifies the type of security. |
Sub Security Type | 1464 | Specifies the type of sub security. |
Risk Classification Type | 11584 | Specifies the risk classification type for the security. This value allows funds to disclose the primary type of underlying risk within derivatives contracts and hedging activity, such as interest rate risk, credit risk, and so on. The FAS 161 report uses this information. You can select any value defined for the RISK_TYPE code category. |
Granularity Category | 11476 | Specifies the asset's classification for ledger granularity purposes. If the security attributes available for ledger granularity account breakouts (security type, long/short indicator, Federal tax indicator, market sector description, affiliated/unaffiliated, and issue country) do not provide enough detail, you can use a granularity category to classify the asset for ledger reporting. Code values are maintained under the GRANULARITY_CAT code category. |
Cost Basis Rule Type | 2817 | Specifies the cost basis rule type for cost basis reporting. |
Quantity Type | 12 | Displays the quantity generally accepted as a standard for exchange, such as shares and par. |
Price Multiplier | 18 | Determines what the system uses for a price. You should not change this value once a position exists. |
Quantity Scale | 19 | Calculates the ratio of units bought to units used for earnings. The default is 1, so that 1 unit of par purchased equals one unit of earnings. You should not change this value once a position exists. |
Country of Risk | 2288 | Specifies the issuer of the security's principal place of business. |
Country of Risk Code | 10536 | Specifies the code of the issuer of the security's principal place of business. |
Issue Country | 2290 | Specifies the name of the country that issued the security. |
Issue Country Code | 1418 | Specifies the code that represents the country that issued the security. |
Asset Currency | 85 | Specifies the currency in which the security is priced. You should not change this value once a position exists. |
Settlement Currency | 63 | Displays the currency in which the security is settled. |
Income Currency | 1186 | Displays the currency in which the security pays income. |
Primary Exchange | 2291 | Specifies the marketplace in which the security is traded. |
Primary Exchange Code | 17 | Specifies the code of the marketplace in which the security is traded. |
Region | 5423 | Specifies a region. It does not necessarily mean the location of the exchange in which a security is traded. For example, suppose you have a Canadian bond that trades in the London Stock Exchange. You may want to set the region to Canada or North America. |
Notional Reset Type | 4409 | Determines if the Total Return swap's finance leg is adjusted at reset or accrues on the original notional for the life of the swap, and also indicates whether the swap is a forward starting total return swap. Options include:
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Reset Calc Price | 3314 | Determines the price date used for calculating a total return swap reset for the swap leg. This field becomes available when you enter a swap leg with a processing security type of SWLXEQ or SWLEDB. Options include:
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Preceding Business Days | 10548 | If you set the Reset Calc Price field to a value of Prior Business Day for the swap leg, you must use this field to specify the number of business days to look back prior to the reset transaction when calculating the cash payment. |
Default Indicator | 1551 | Indicates whether a security is in default. Options include:
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Default Date | 10142 | Specifies the date on which the security went into default. |
Dividend Percent | 4586 | Specifies the dividend percentage provided in the trade for the swap leg. This field becomes available when you enter a swap leg with a processing security type of SWLXEQ. |
Look Thru Value | 1808 | Used to view exposure to the underlying security, index, or portfolio. |
Look Thru Ind | 1776 | Specifies the underlying security. |
| Amortization Accretion Rule Type | 12008 | Specifies the amortization/accretion rule type for the contract level security. |
Swap Payment Periods | ||
Coupon | 70 | Specifies the rate at which the security accrues interest. It is expressed as an accrual rate. A value of zero is required for zero coupon bonds. |
Coupon Type Code | 97 | Indicates the type of coupon associated with the security. Options include:
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Day Count Basis | 471 | Specifies the number of days assumed in a month or year when interest rates are quoted. For more information, see About Day Count Basis. |
Payment Frequency | 2287 | Specifies the frequency at which the security pays interest. |
Payment Frequency Code | 427 | Specifies the code that represents the payment frequency. |
Business Day Convention | 1536 | Used with the payment frequency value to determine when a coupon should pay interest should the scheduled coupon due date occur on a non business day. |
Coupon Day of Month | 10551 | If you specify a value for Business Day Convention (tag 1536) field other than None, you must specify the day of the month on which the coupon pays. You can enter a value from 1 to 31. |
Business Calendar Name | 1480 | Specifies the business calendar for the security. The system uses the calendar to identify business days and non business days for the purposes of determining the coupon payment date and coupon payment schedules. |
Day of Month Override | 1533 | Identifies the day of the month or business day of the month on which the security is to pay income. This is based on the business calendar, and is used in conjunction with the payment frequency to determine the correct coupon payment schedule. This option is not required for business day processing, but offers flexibility when a coupon schedule is unique. |
Interest Payment Timing | 1523 | Specifies the day of the month in which interest is paid. Options include:
This option is not required for business day processing, but offers flexibility when a coupon schedule is unique. |
Delay Days | 1799 | Specifies the number of days between the end of the accrual period and the actual receipt of the coupon and principal payment. The system uses this value in the creation of coupons, paydown transactions, and payup transactions, as well as in the Cash Flow Projections report. |
Delay Days Type | 5074 | Indicates whether the delay days are business days or calendar days. Options include:
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Coupon Delay Days | 4908 | Extends each calculation period x number of days past the valuation dates that are projected using the First Coupon Date and Last Coupon Date fields. This functionality is designed specifically for total return swaps that stipulate a delayed payment convention. This field shifts the actual coupon and reset dates, not just the cash settlements. To delay settlement of the cash associated with a coupon, use the Delay Days field. |
Coupon Delay Days Type | 3999 | Specifies whether the coupon delay days are business days or calendar days. Options include:
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Maturity Delay Days | 3997 | Delays the maturity process for x number of days past the maturity date, which allows the position to be available for pricing and reporting. |
Maturity Delay Days Type | 3998 | Specifies whether the maturity delay days are business days or calendar days. This value is used to determine the date the swap is matured using the global maturity process. Options include:
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Swap Dates | ||
Issue Price | 69 | Specifies the original issue price of the security. |
Issue Date | 68 | Specifies the first day the security can be traded. |
Dated Date | 1183 | Specifies the date the security first begins to accrue interest. For swaps, this field is often referred to as the effective date. |
Maturity Date | 38 | Specifies the date that the security repays all outstanding income and stops earning interest. |
First Payment/Valuation Date | 473 | Specifies the date of the first valuation for the swap leg. You can use the Coupon Delay Days field (tag 4908) to extend the calculation period. |
Last Payment/Valuation Date | 474 | Specifies the date of the last valuation for the swap leg. Eagle recommends that you enter the penultimate payment date. You can use the Coupon Delay Days field (tag 4908) to extend the calculation period. |
Final Valuation Date | 1369 | Specifies the final valuation date used to determine the price for the swap leg. This overrides the final valuation date calculated by the system and is typically used only for bullet swaps . This value is not required for processing. |
Maturity Price | 42 | Specifies the price at which the security returns income. |
| Generate Swap Reset Schedule | 2299 | Indicates whether the system adds a Coupon/Reset type schedule for the security when you create or edit the security. For total return swaps, you define this option at the security's contract level. For more information, see Manage Swap Reset Schedules. Options Include:
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Swap Leg Flags | ||
Underlying Type | 916 | Defines the type of underlying security for downstream processing by Eagle Enrichment. The available elections are linked to code values retrieved from the UNRLYINGSECTYPE code category. This field does not affect accounting processes. |
| Time Sensitive Indicator | 11926 | Specifies whether the security uses floating rate data that changes over time if you set the Coupon Type field to Floating Rate. This option can apply to the security used for the Accrual/Finance leg (processing security type of Swap Leg Interest Accrual, or SWLEAC) for total return swaps. Identifying swaps as time sensitive allows you to track spread changes between coupon dates using SMF earnings time periods. For details, see Calculate Earnings for Swaps When the Spread Changes Between Coupon Dates. Options include:
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| Existing Effective Dates | 7017 | Specifies the effective dates that correspond to spreads previously entered for the swap leg. If you previously entered one or more spreads, this date shows the most recent effective date by default. The field lookup allows you to view the effective dates for any spreads previously entered for the leg. You can select a date from the lookup in cases where you want to change the corresponding spread effective on an existing date. This field appears if you change a swap leg where you previously set the Time Sensitive Indicator to Yes. |
| As Of Effective Date | 4212 | Specifies the effective date for the spread for the swap leg when you edit the security. This field appears if you change a swap leg where you previously set the Time Sensitive Indicator to Yes. By default a new spread value takes effect on the current date. You can change the As Of Effective Date if you are defining a new spread to take effect on a different date or are changing an existing spread. |
Swap Leg Floating Rate Information | ||
First Rate Reset Date | 10911 | Specifies the first calendar date that the rate resets from the dated date of the security. The system uses the First Rate Reset Date field, along with Reset Frequency Code, Business Calendar, and Business Day Convention field values to create the floating rate reset schedule of the security. This field appears and is required only if you set the Coupon Type Code field (tag 97) to a value of either X (Floating Rate) or R (Inverse Floater). |
Reset Frequency | 476 | Specifies the frequency at which the security resets its rate, beginning from the date defined in the First Rate Reset Date field. This field appears only if you set the Coupon Type Code field (tag 97) to a value of either X (Floating Rate) or R (Inverse Floater). Options include:
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Reset Frequency Code | 1788 | Specifies the code associated with the frequency at which the security resets its rate beginning from the date defined in the First Rate Reset Date field. This field appears and is required only if you set the Coupon Type Code field (tag 97) to a value of either X (Floating Rate) or R (Inverse Floater). Options include:
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Reset Look Back Days | 10547 | Specifies the actual number of days to look back when setting the rate on the reset date. Floating Rate type securities can use a past rate on the specified reset date. This field appears only if you set the Coupon Type Code field (tag 97) to a value of either X (Floating Rate) or R (Inverse Floater). |
Reset Lookback Days Type | 5075 | Indicates whether the system bases the reset look back days on valid business days or actual calendar days. This field appears only if the Coupon Type Code field (tag 97) has a value of X (Floating Rate) or R (Inverse Floater). Options include:
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| Fixing Date Business Center | 16407 | Specifies the fixing date business calendar for the security. The Earnings process uses this business calendar you select to identify business days and non business days for the purposes of determining the fixing date for floating rate and inverse floating rate coupon date. The fixing date is the date on which a rate/price is selected for use on the reset date. If you do not select a value, the Earnings process uses the business calendar selected in the Business Calendar Name field (tag 1480) to determine the fixing date. This option allows you to specify separate calendars when a security uses one calendar for dropping coupons and a different calendar for resetting the floating rate. This field appears only if the Coupon Type Code field (tag 97) has a value of X (Floating Rate) or R (Inverse Floater). |
Periodic Cap | 10907 | Specifies the maximum allowed increase in a variable rate from one period to the next. This field appears only if you set the Coupon Type Code field (tag 97) to a value of either X (Floating Rate) or R (Inverse Floater). |
Periodic Floor | 10908 | Specifies the maximum allowed decrease in a variable rate from one period to the next. This field appears only if you set the Coupon Type Code field (tag 97) to a value of either X (Floating Rate) or R (Inverse Floater). |
Lifetime Cap | 10909 | Specifies the maximum coupon rate allowed during the life of the security. This field appears only if you set the Coupon Type Code field (tag 97) to a value of either X (Floating Rate) or R (Inverse Floater). |
Lifetime Floor | 10910 | Specifies the minimum coupon rate allowed during the life of the security. This field appears only if you set the Coupon Type Code field (tag 97) to a value of either X (Floating Rate) or R (Inverse Floater). |
| Swap Leg Underlying Information | ||
| Underlying Security ID | 1348 | Specifies the security identifier of the underlying security for the swap leg. This field appears only if you set the Coupon Type Code field (tag 97) to a value of either X (Floating Rate) or R (Inverse Floater). |
| Underlying Issue Name | 1141 | Specifies the issue name of the underlying security for the swap leg. This field appears only if you set the Coupon Type Code field (tag 97) to a value of either X (Floating Rate) or R (Inverse Floater). |
| Underlying Security Alias | 1347 | Displays the asset identifier of the underlying security for the swap leg. This field appears only if you set the Coupon Type Code field (tag 97) to a value of either X (Floating Rate) or R (Inverse Floater). |
| Underlying Security Ticker | 1349 | Displays the ticker of the underlying security for the swap leg. This field appears only if you set the Coupon Type Code field (tag 97) to a value of either X (Floating Rate) or R (Inverse Floater). |
| Underlying Type | 7103 | Specifies the type of the underlying index for the swap leg. This field appears only if you set the Coupon Type Code field (tag 97) to a value of either X (Floating Rate) or R (Inverse Floater). Options include:
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| Index Offset | 215 | Specifies the basis point adjustment to the underlying index, for the purpose of calculating the coupon rate of a security. For total return swaps, you can use this field to define spread changes that occur on non-coupon dates for the swap leg. For more information, see Calculate Earnings for Swaps When the Spread Changes Between Coupon Dates. This field appears only if you set the Coupon Type Code field (tag 97) to a value of either X (Floating Rate) or R (Inverse Floater). |
| Interest Rate Conversion Flags | ||
| Convert Interest Rate | 9154 | Indicates whether you can convert the fixed income security's reference interest rate from one rate quotation basis to another. For more information, see Convert a Security's Interest Rate from One Rate Quotation Basis to Another. Options include:
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| Rate Conversion Rule | 12849 | Identifies the name of the rate conversion rule used to convert the fixed income security's reference interest rate from one rate quotation basis to another. The rate conversion rule determines the inputs of the conversion calculation. This field appears if you set the Convert Interest Rate field to Yes. If you set up a floating rate or inverse floating rate security with a reference rate for an underlying index that converts the interest rate, this field displays the rate conversion rule you specified for the underlying index as the default value. Otherwise, you can select a rule. Options include:
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