Pay special attention to underlined sections, as these highlight the most frequently encountered issues. Bold is used for navigation, modules, and screens. Italics are used for fields, tables, and errors. Fixed width indicates values for fields or code/text that should be entered. Tags are shown in parentheses (#) after field names.

Entity Setup

Entities trading Negative/Zero Interest Rate Securities do not require any special setup. They will amortize like any other fixed income security based on the entity's Primary Amortization/Accretion Rule (3197).

Reference Data

Storage & Configuration

Standard fixed income functionality can be used to model Negative/Zero Interest Rate Securities. Each security master file (SMF) has a single row in Data Management, with the exception of multi-leg swaps that have three rows (contract, pay leg, and receive leg).

Market Data

All Versions Above V12.1/V13.1.2

Fixed rate securities can be set up with Coupon Type (97) = F (Fixed Rate) and the negative/zero fixed rate can be entered directly in Coupon (70) on the SMF.

Pre-V12.1/V13.1.2

• Negative: fixed rate securities must be set up with Coupon Type = I (Variable Rate)
  • The negative fixed rate can then be loaded as a variable rate as of Dated Date (1183)
  • Negative rates are not supported with Coupon Type = F (Fixed Rate)
• Zero: fixed rate securities can be set up with Coupon Type = F (Fixed Rate) and the zero fixed rate can be entered directly in Coupon (70) on the SMF

Security Data

All Versions Above V12.1/V13.1.2

• Coupon (70): contractual negative/zero interest rate
• Coupon Type (97) = F (Fixed Rate)

Pre-V12.1/V13.1.2

• Negative
  • Coupon (70) = 0.00
    • Contractual negative interest rate loaded as a variable rate
  • Coupon Type (97) = I (Variable Rate)
• Zero
  • Coupon (70) = 0.00
  • Coupon Type (97) = F (Fixed Rate)

Trade Processing

Open

Trades are entered using the Book Trade module once the entity and reference data have been configured, just like any other fixed income security. Enter the appropriate entity, security identifier, and trade (35)/settle dates (37) and click Submit to query for the security. Right-click it and select Open > Buy or ShortSell or Open Swap Contract.

• Par/Notional Value * Price +/- Traded Interest = Local Cash Movement
  • Note: the one exception is a Total Return Swap (TRS), where opens are always cashless unless a fee is entered directly on the contract

Close

The Book Trade module should also be used to process both full and partial closes, again just like any other fixed income security. Enter the same information as the open to query for the security. Right-click it and select Close > Sell or BuytoCover or Close Swap Contract.

• Par/Notional Value * Price +/- Traded Interest = Local Cash Movement
  • Note: the one exception is a TRS, where cash is equal to realized gain/loss +/- any fee entered directly on the contract

Cancel & Rebook

Faulty Negative/Zero Interest Rate Security transactions can be cancelled and rebooked using the core Cancel & Rebook Trade process. The faulty position will be removed, correct information should be entered, and a new position will be established. The exception is multi-leg swaps, which must be canceled using Batch Cancel Trades. Then the trade must be reentered using Book Trade.

Accounting

Once a Negative/Zero Interest Rate Security 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.

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

  • Accruals: Earnings > Run Income Accruals

  • 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

  • Accruals: Earnings > Accrue

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

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

Journal Entries

If a swap leg is long, Eagle Accounting makes negative postings to a receivable account. If the swap leg is short, the negative postings are to a payable account. Swap accrual postings are not made to the opposite account (payable vs. receivable) when accruing on negative interest rates.

Valuation

The value of a Negative/Zero Interest Rate Security is calculated using the formulae below:

• Market Value = Par/Notional Value * Quantity Scale * Price * Price Multiplier
  • Note: the one exception is a TRS, where market value = unrealized gain/loss
• Market Value Income = Market Value +/- Accrued Interest

Prices must be supplied as clean unit prices (exclusive of accrued interest). If accrued interest in included in the price (dirty price), it will be double-counted during valuation.

Mature/Expire

Negative/Zero Interest Rate Securities will be picked up by Accounting’s core maturity process. This will be scheduled in production environments, but can be triggered manually via Accounting Center > Processing and Exceptions > Global Processes > Expirations & Maturities > Run Mature Process (V17) or Global Process Center > Expirations > Mature (pre-V17).

• The final Maturity Date (38) cash flows based on a negative interest rate depend on whether the security was held long or short (swaps only have an interest payment at maturity)
  • Long: receipt of par value - disbursement of accrued interest
  • Short: disbursement of par value + receipt of accrued interest

Reporting

STAR to PACE (S2P)

Almost all reports in Eagle Accounting leverage data from Data Management, 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 for each Negative/Zero Interest Rate Security (or three for multi-leg swaps) in the POSITION, POSITION_DETAIL, TRADE, and CASH_ACTIVITY tables. The MARKET_VALUE_INCOME column captures both price- and accrual-based market value.

Accounting Reports

Eagle has a core set of accounting reports that can be used to review Negative/Zero Interest Rate Security 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.

Performance

The performance toolkit is preconfigured to calculate market value-based performance for Negative/Zero Interest Rate Securities using data supplied by the S2P process. Negative interest on a long position and positive interest on a short position will be appropriately reflected in performance calculations.

• Risk analysis and performance attribution analysis features are available to analyze Negative/Zero Interest Rate Security performance

Automation

Eagle supports loading Negative/Zero Interest Rate Security 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 Supported Generic Interfaces V17 for more information.