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

• Bond Forward - Cash Settlement.xlsx
• Bond Forward - Physical Delivery.xlsx

Entity Setup

Before any trades can be booked, the target entity must be set up appropriately. You need to populate the Futures-related entity fields described in Futures Entity Setup Processing Notes.

In addition, we recommend setting Option And Futures Expire Delay Days (12101) to 1 to prevent the Bond Forward position from being automatically expired. Please note this will impact other option and future positions held on same entity.

Reference Data

Storage & Configuration

Bond Forwards are modeled using the Futures processing type. On expiration, standard fixed income functionality can be used to model the underlying bond in the case of physical delivery. Each security master file (SMF) will have a single row in Data Management.

Market Data

Eagle Accounting requires unit prices inclusive of any applicable discounting. These prices are used to calculate notional market values for valuation. Eagle Accounting calculates the unrealized gain/loss, which is also the market value for Bond Forwards, based on the difference between notional market value and notional cost. Refer to the Valuation section for additional information.

Security Data

Bond Forwards can be set up and maintained in Issue Viewer, Security Reference Manager (SRM), or Reference Data Center (RDC).

• Processing Security Type (3931) = FTXXXX

• Price Multiplier (18) = 0.01

• Quantity Scale (19) = 1.00

• Variation Margin (4533) = No

The same tools can also be used to set up an SMF for the underlying bond if the Bond Forward is going to be physically delivered. In this case the underlying bond SMF can be set up at the same time as the Bond Forward, or you can wait to set it up until the Bond Forward is actually expiring.

• You may want to use the same Issue Name (961) and Issue Description (962) for the Bond Forward and underlying bond, in which case you can use Security Type (82) and/or Sub-Security Type (1464) to differentiate the Bond Forward from the underlying bond

Trade Processing

Trades are entered using the Book Trade module once entity and reference data have been configured. Enter the appropriate entity, security identifier, and trade (35)/settle (37) dates and click Submit to query for the security. When you right-click the security, the options for opening and closing it will depend on whether the entity-level Net Futures Positions field is set to Yes or No.

• Open the Bond Forward using the quoted units and the agreed-upon price on trade date

Refer to Futures (FUT) Best Practices for additional information about trades using the Futures processing type.

Final Settlement

A Bond Forward can have two different methods upon final settlement: cash settlement or physical delivery.

Cash Settlement

Settle the position by entering a close at the prevailing market price. The resulting cash settlement will be equal to the gain/loss.

Physical Delivery

Settle the position by entering a close for the Bond Forward and an open for the underlying bond. The prices for these transactions depend on how you want to recognize the premium's URGL.

• Move Premium to Underlying
  • Enter a close at cost (same price as the open) 
    • This prevents any cash from being generated
  • Buy the underlying bond, again using the same price at which the Bond Forward was originally booked
    • This will immediately factor the premium into the bond's URGL
• Recognize Premium on Bond Forward
  • Enter a close at the prevailing market price
    • This moves the URGL to realized and generates cash
  • Buy the underlying bond at the prevailing market price
    • This will prevent the premium from being factored into the bond's URGL

Accounting

Once a Bond Forward trade is booked it will be picked up in Eagle’s global workflow. Accounting valuation is calculated when posting unrealized gain/loss and Data Management valuation is calculated in the STAR to PACE push. These can also be triggered manually via Global Process Center:

• V17 & Above: Accounting Center > Processing and Exceptions > Global Processes

  • Accounting Valuation: Unrealized Gain Loss Entries > Post Daily Fund Unrealized Gain Loss-Position

  • Data Management Valuation: Eagle STAR to Eagle PACE Direct Processing > Transfer Data - Batch

• Prior to V17: Global Process Center

  • Accounting Valuation: Unrealized Gain Loss Entries > Post Daily Fund Unrealized Gain Loss-Position

  • Data Management Valuation: STAR to PACE Direct Processing > Transfer Data - Batch

Note: if a Bond Forward requires settling coupon payments, these should be processed using Miscellaneous Income, Asset Specific entries.

Valuation

Bond Forwards are valued at their unrealized gain/loss (URGL). Eagle Accounting requires unit prices inclusive of any applicable discounting. The formulas below show the calculation being broken down into its component parts.

• Market Value = URGL
• Market Value = Notional Market Value - Notional Cost
• Market Value = # of Contracts * Contract Size * (Current Price - Trade Price) * Price Multiplier

Price Conversion

Some vendors are only able to provide a price equal to the unitized discounted URGL. In these cases, price conversion functionality is available to convert the discounted URGL price (base = zero) to a MV price (base = open trade price). This is only available for Bond Forwards that are modeled as described in this document and that are held in a single fund. If a single Bond Forward SMF is held in multiple funds, an incorrect price may be calculated.

The functionality is available in the Add Issue Price Conversion, Edit Issue Price Conversion, and Add/Edit Price Exchange Conversion screens. There is logic in these screens to find the entity that holds the Bond Forward, look up the open trade price, and add the discounted URGL price to it. The components used to calculate the price (excluding Open Unit Price) are stored in the PRICE or PRICE_EXCHANGE table for audit purposes. Open Unit Price can be pulled from the TRADE or LOT_LEVEL_POSITION tables.

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 one row for each Bond Forward in the POSITION, POSITION_DETAIL, TRADE, and CASH_ACTIVITY tables. The MARKET_VALUE_INCOME column for each row captures a portion of the total market value.

Accounting Reports

Eagle has a core set of accounting reports that can be used to review Bond Forward 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

General Reporting (Eagle OLAP)

OLAP reports provide the maximum level of customization, allowing any column in Data Management to be pulled into a report. These go beyond the Eagle Accounting Grid Reports because they are not limited by core queries, can support multiple sources and various types of calculations, and provide drill-down functionality based on user-defined groupings.

Exposure

Exposure reporting and analysis are available in the product suite, but some accounting data must be augmented via Eagle Enrichment. Please contact Instrument Engineering for more implementation information based on your specific requirements. Additional details are available in Exposure Reporting Best Practices and Manage Eagle Enrichment.