About Synthetic Cash Securities
Synthetic cash securities are not tangible assets, and funds never actually own a position in them. During the enrichment process a phantom position is created in synthetic cash for each directly held future or option. For this to occur there must be a synthetic cash security linked to its parent future or option.
For example, a portfolio that owns a future and an option would have accounting based holdings that look like this:
Portfolio ABC:
- Future 1
- Option 1
However, the exposure view of this portfolio requires that holdings look like this:
Portfolio ABC:
- Future 1
- Syncash Future 1
- Option 1
- Syncash Option 1
Create Synthetic Cash Securities
WRITERS NOTE: 2015 guide described the Future Contract panel in Market Data Center. Is update below for Issue Viewer panel and RDC ok? Anything else to say about using RDC? Use Synthetic Cash data strategy if that is standard? Also, can we stop mentioning V11 now? Does anyone still use it?
Use the Create Synthetic CASH Security option when adding or editing existing futures and options. The following procedure describes how to use Issue Viewer to create a synthetic cash security. You can also use Reference Data Center to create a synthetic cash security.
To create synthetic cash securities:
- From Issue Viewer, open the Future Contract panel, following the instructions in Manage Future Contracts in Issue Viewer.
- Set the Create Synthetic CASH Security field to Yes to automatically create synthetic cash and link it to the parent asset. Otherwise, select No if you do not want to create notional exposure for these instrument types. The future or option security is created without a synthetic cash counterpart.
NOTE: If you have futures and options you set up prior to V11.0, when you open a preexisting security, the Create Synthetic CASH security option is set to No. Set the option to Yes. Once submitted, the synthetic cash security is created. - Complete the remaining panel options as appropriate.
- Click Submit.
After you submit the request:
- The future or option is established as security master according to the values specified in the panel.
- The auto-create synthetic cash process establishes a security master for a synthetic cash counterpart as shown in the following table.
Field | Value |
---|---|
Security Alias | New unique value. |
Primary Asset ID | Inherit (duplicate) value from parent security. |
Investment Type | Set to SYNTH. |
Security Type | Set to SYNCASH. |
Sub Security Type | Set to CASH. |
Processing Security Type | Set to SYNTHETIC. |
Issue Name | Append Synthetic Cash + parent issue name. |
Issue Description | Append Synthetic Cash + parent issue description, |
Ticker | |
Currency Code Security | Inherit (duplicate) value from parent security. |
Income Currency | Inherit (duplicate) value from parent security. |
Quantity Type | Append SYN + parent currency code. |
Trading Unit | Set to 1. |
Price Multiplier | Set to 1. |
Once the security master is complete, the process establishes a relationship between the parent security and its syncash counterpart. The relationship is maintained on SECURITYDbo.UNDERLYING_SECURITY.
Field | Value |
---|---|
Security Alias | Security Alias of parent security. |
Underlying Security Alias | Security Alias of synthetic cash security. |
Underlying Type | Set to SYNTHETIC. |
Start Date | Set to current date. |
Once synthetic cash securities are established, you can query or edit them using Issue Viewer or Reference Data Center. For example, in downstream reporting, you may have a report grouped on sub-security type. Synthetic cash is assigned a sub-type of CASH. If you do not want synthetic cash grouped in the CASH category, use Eagle tools to change the synthetic cash security attributes.
Work with Preexisting Processes
You may already have custom procedures in place to create synthetic cash. Unlike some custom procedures, the enrichment process does not create synthetic cash securities. Security reference data for synthetics must exist ahead of time. Before using a custom procedure for maintaining synthetic cash, be aware of the following requirements.
- Every future and option must have its own synthetic cash counterpart. The derivative and its synthetic counterpart must have:
- A unique security_alias
- A common primary_asset_id
- Eagle suggests the following best practices when using additional security master information for the synthetic cash securities:
- Security Alias. A new unique value.
- Primary Asset ID. Inherit (duplicate) value from parent security.
- Investment Type. Set to SYTH.
- Security Type. Set to SYNCASH.
- Sub Security Type. Set to CASH.
- Processing Security Type. Set to SYNTHETIC.
- Issue Name. Append Synthetic Cash + parent issue name.
- Issue Description. Append Synthetic Cash + parent issue description.
- Ticker. Append SYN + parent currency code.
- Currency Code. Inherit (duplicate) value from parent security.
- Income Currency. Inherit (duplicate) value from parent security.
- Quantity Type. Set to CASH.
- Trading Unit. Set to 1.
- Price Multiplier. Set to 1.
- The relationship between the derivative and its synthetic cash counterpart must be maintained on SECURITYdbo.UNDERLYING_SECURITY, and must have its relationship type maintained. The underlying relationship should have the following information:
- Security_Alias. Set equal to the security alias of the parent derivative.
- Underlying_Sec_Alias. Set equal to the security alias of the associated synthetic cash security.
- Underlying_Type. Set to SYNTHETIC (all uppercase).
- Begin_date. Set to the derivatives begin date.