A Time Deposit is a simple investment Deposits are simple investments that most commonly accrues accrue a fixed interest rate payable at maturity. Global nomenclature for time deposits Time Deposits includes Certificates of Deposit (CDs), Guaranteed Investment Certificates, and Term Deposits. Time Deposits tend to pay slightly higher interest rates compared to savings accounts, and the common model is to prohibit or discourage withdrawal prior to maturity date by imposing early withdrawal fees. Time Deposits should be set up using the same functionality as Repos in the "lend money" scenario.

This document covers the details of Data Management, Accounting, and Performance measurement for Repos & Time Deposits.

Example reference data screens, trade screens, and reports are attached:

• Repo Examples.xlsx

Entity Setup

Entities trading Repos & Time Deposits do not require any special setup. If the security is traded at a price other than par, amortization will be processed based on entity's Primary Amortization/Accretion Rule (3197).

Reference Data

Storage & Configuration

Repos & Time Deposits are modeled as single rows in Data Management. There are two options for modeling Repos & Time Deposits:

1. Book & Build: the security master file (SMF) is created automatically during transaction entry, with a Processing Security Type (3931) of DBIBMA (Interest-Bearing Payment at Maturity)
   1. This is similar to booking Forwards when the entity election Forward Security Exists (675) = No
2. Multi-Step: the SMF must be created before transaction entry, with a Processing Security Type (3931) of DBIBST (Interest Bearing Short Term)
   1. This provides flexibility to use a Coupon Type (97) other than F (Fixed) and a Payment Frequency (472) other than MAT (At Maturity), which may be necessary for certain types of Repos

Market Data

Repos are generally fixed rate and valued at par value +/- accrued interest, resulting in very little associated market data. DBIBMA only supports fixed rates. DBIBST support all rate types:

• If floating rate, rates must be loaded to the VARIABLE_RATE table for the underlying index of the Repo beginning on Dated Date (1183)
• If variable rate, rates must be loaded to the VARIABLE_RATE table directly for the Repo beginning on Dated Date

Negative Interest Rates

Depressed economic conditions can lead to negative repo rates in some extreme cases. Eagle Accounting has core support for accruing on negative interest rates, including when a floating rate plus or minus a spread goes negative.

Security Data

Whether using the Book & Build or Multi-Step approach, the required security reference data is nearly identical.

• Book & Build: security reference data is defined during transaction entry
• Multi-Step: security reference data is defined prior to transaction entry using Issue Viewer, Security Reference Manager (SRM), or Reference Data Center (RDC)

Other than basic identifier and country information, the following fields define Eagle’s recommended setup for Repos & Time Deposits.

• Processing Security Type (3931)
  • Book & Build = DBIBMA (Interest-Bearing Payment at Maturity)
  • Multi-Step = DBIBST (Interest Bearing Short Term)
  • Do not use DBIBRP (REPO) or DBIBRR (Reverse REPO) as they have been retired 
• Price Multiplier (18): enter 0.01 if you intend to price at 100, or 1.00 if you intend to price at 1.00 
  • Both will produce a market value equal to par value
• Quantity Scale (19) = 1.00
• Coupon (70): contractual interest/repo rate
  • See Negative & Zero Interest Rates for information on processing negative repo rates
• Coupon Type (97)
  • Book & Build = F (Fixed Rate)
  • Multi-Step: typically F (Fixed Rate), but can be X (Floating Rate) or I (Variable Rate) if applicable
• Payment Frequency (471)
  • Book & Build = MAT (At Maturity)
  • Multi-Step: typically MAT (At Maturity), but can be different if applicable
    • For open term (Evergreen) Repos, enter 1_D (Daily)
• Issue Price (69): enter 100 if you intend to price at 100, or 1.00 if you intend to price at 1.00
• Issue Date (68): start date
• Dated Date (1183) = date when accruals begin, typically the same as Issue Date
• First Coupon Date (473): typically Maturity Date
• Last Coupon Date (474): typically Maturity Date
• Maturity Date (38): end date when final cash payment is exchange
  • For Evergreen Repos, choose a Maturity Date far in the future
• Maturity Price (42): enter 100 if you intend to price at 100, or 1.00 if you intend to price at 1.00
• OID Indicator (218) = No

Collateral securities can be attached for reference and reporting purposes by using Add Underlying Security.

Trade Processing

Lend Money/Borrow Collateral (Time Deposit)

Open

• Positions can be established through the Book Trade module by entering an Open > Buy of the short-term security
  
  • Par Value/Current Face (40) = net amount of the cash being delivered/lent/deposited
  • Price (45) = enter 100 if Price Multiplier = 0.01, or 1.00 if Price Multiplier = 1.00
• Allow the position to accrue on a daily basis, which will post as interest receivable

Close

• Positions are typically held to maturity given their short lives, but if one is open term, it can be closed through the Book Trade module by entering a Close > Sell
  • Trade Date (35) & Settlement Date (37) = settlement date of final cash exchange
  • Par Value/Current Face (40) = net amount of the cash initially delivered/lent/deposited
  • Price (45) = enter 100 if Price Multiplier = 0.01, or 1.00 if Price Multiplier = 1.00
  • Select Values to Be Calculated by STAR (7000) = Traded Interest
    • This will be added to Par Value/Current Face to generate the full cash exchange

Borrow Money/Lend Collateral

Open

• Positions can be established through the Book Trade module by entering an Open > ShortSell of the short-term security
  • Par Value/Current Face (40) = net amount of the cash being received/borrowed
  • Price (45) = enter 100 if Price Multiplier = 0.01, or 1.00 if Price Multiplier = 1.00
• Allow the position to accrue on a daily basis, which will post as interest payable
• Pledging: to restrict the sale of the security or securities being posted as collateral, refer to Pledging & Restrictions for details

Close

• Positions are typically held to maturity given their short lives, but if one is open term it can be closed through the Book Trade module by entering a Close > BuytoCover
  • Trade Date (35) & Settlement Date (37) = settlement date of final cash exchange
  • Par Value/Current Face (40) = net amount of the cash initially received/borrowed
  • Price (45) = enter 100 if Price Multiplier = 0.01, or 1.00 if Price Multiplier = 1.00
  • Select Values to Be Calculated by STAR (7000) = Traded Interest
    • This will be added to Par Value/Current Face to generate the full cash exchange
• Pledging: release the security or securities posted as collateral if they were pledged

Accounting

Once a Repo or Time Deposit trade is booked it will be picked up in Eagle’s global workflow. Daily accruals (whether positive, negative, or zero) and periodic coupons are generated as part of the earnings process, Accounting valuation is calculated when posting unrealized gain/loss, and Data Management valuation is calculated in the STAR to PACE push. These can be scheduled or triggered manually.

Valuation

Repos & Time Deposits should be priced at 100 on a daily basis if Price Multiplier = 0.01, or 1.00 if Price Multiplier = 1.00, in order to produce a market value = par value and a market value income = par value +/- accrued interest.

The value of a Repo or Time Deposit is calculated using the formulae below:

• Market Value = Par Value * Quantity Scale * Price * Price Multiplier
• Market Value Income = Market Value +/- Accrued Interest

Pledging: when borrowing money/lending collateral, positions pledged as collateral should continue to be marked to market, or in accordance with your legal accounting requirements and standards.

Mature

Repos & Time Deposits will be picked up by Accounting’s core maturity process. This will also be scheduled in production environments, but can be triggered manually via Accounting Center > Processing and Exceptions > Expirations & Maturities > Run Mature Process.

• The final cash flows on Maturity Date depend on whether the position was held short (borrow money/lend collateral) or long (lend money/borrow collateral)
  • Short: disbursement of par value - disbursement of accrued interest
  • Long: receipt of par value + receipt of accrued interest
• Pledging: when borrowing money/lending collateral, release any pledged securities posted as collateral

Reporting

STAR to PACE (S2P)

Almost all reports in Eagle leverage data from the Warehouse, which is populated by the S2P process. This will be scheduled as part of the daily workflow, but can also be triggered manually as described in the Accounting section.

The S2P process creates a single row for each Repo in the POSITION, POSITION_DETAIL, TRADE, and CASH_ACTIVITY tables.

Accounting Reports

Eagle has a core set of accounting reports that can be used to review Repo information. These are designed to support the daily operational workflow for business users, allowing Grid Reports to be easily exported to Excel and customized to provide additional details as needed. Advanced Reports are intended to be client-facing and do not provide the same level of customization.

Data Management Reporting

Performance

The performance toolkit is preconfigured to calculate market value-based performance for Repos using data supplied by the S2P process. Performance calculations will appropriately reflect whether the position is short (borrowing money) or long (lending money). Risk analysis and performance attribution analysis features are available to analyze Repo performance.

Automation

Eagle supports loading Repo SMFs and trades through standard Message Center streams. The SMF must be loaded prior to the trade (trades will not automatically spawn SMF records). Refer to the Supported Generic Interfaces guide for more information.