A dealer can borrow $10 million overnight from a corporate treasurer at an interest rate of 3 percent per annum by selling Treasury notes valued at $10,000,000 and simultaneously agreeing to repurchase the same notes the following day for $10,000,833. The payment from the initial sale is the principal amount of the loan, while the excess of the repurchase amount over the sale price ($833) is the interest on the loan. As with a collateralized loan, the corporate treasurer has possession of the dealer's securities and can sell them if the dealer defaults on its repurchase obligation.

Time Deposits are simple investments that most commonly accrue a fixed interest rate payable at maturity. Global nomenclature for 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:

• View file
  name Repo & Reverse 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

1. ) of DBIBMA (Interest-Bearing Payment at Maturity)

   1. This is similar to booking Forwards when the entity election Forward Security Exists (675) = No

   2. Short trades (borrow money/lend collateral) are supported in V17 and above

2. Multi-Step: the SMF must be created before transaction entry, with a Processing Security Type (3931) of DBIBST (Interest Bearing Short Term)

1. 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

•  beginning on Dated Date (1183)

• If variable rate, rates must be loaded to the VARIABLE_RATE table directly for the Repo or

• Time Deposit 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 using Build & Book Short Term Deposits

• 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 Best Practices 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

• Book & Build positions are established through Build & Book Short Term Deposits with Event Type (55) = DEPOSIT or BUY (both produce the same results)

  • BUY is available in V17 and above

• Multi-Step positions are 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 lent/delivered/

• 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

Collateral

To track collateral received, set up a dummy entity and use free receive/deliver transactions to manage the quantities and monitor valuations. This requires the collateral securities be set up and priced.

To add or increase the amount of collateral received:

• Open Book Trade

• Enter the same Trade Date (35) and Settle Date (37) as the Repo, or the date of the collateral rebalance

• Query for the security being received as collateral

• Right-click and select Other > Receive

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

• • lent/delivered/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

Collateral

To decrease the amount of collateral received:

• Open Book Trade

• Set Trade Date (35) and Settle Date (37) equal to Maturity Date (38) of the Repo, or the date of the collateral rebalance

• Query for the security that was received as collateral

• Right-click and select Other > Deliver

Borrow Money/Lend Collateral

Open

• Book & Build positions are established through Build & Book Short Term Deposits with Event Type (55) = SHORTSELL

  • This is available in V17 and above

• Multi-Step positions are 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 borrowed/received

• 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

Eagle Accounting has core functionality to restrict the sale of the security or securities being posted as collateral

. This is called Pledging. Refer to Pledging & Restrictions Best Practices 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 borrowed/received

  • 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 any securities posted as collateral if they were pledged. Refer to Pledging & Restrictions Best Practices for details.

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 long (

• lend money/borrow collateral) or short (

• borrow money/lend 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

https://eagledocs.atlassian.net/wiki/spaces/GENERICINTER for more information.