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.

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

Entity Setup

Before any trades can be booked, the target entity must be set up appropriately. Refer to Options Entity Setup Processing Notes for details.

Reference Data

Storage & Configuration

Eagle has modeled FX Option security master files (SMFs) as single rows in Data Management.

Market Data

Because they are exchange-traded, FX Option prices are readily available from a number of vendors.

Security Data

FX Options can be set up and maintained in Issue Viewer, Security Reference Manager (SRM), or Reference Data Center (RDC). The list below contains all fields required to configure an FX Option SMF.

• Issue Name (961)

• Primary Asset ID (14) & Type (1432)

• Processing Security Type (3931) = OPOPCR

• Contract Size (19): units of currency to which each contract is entitled

• Issue Country (1418)

• Asset Currency (85)

• Expiration Date (38): date when Accounting will automatically expire the FX Option, unless the entity-level Options and Futures Expiration Delay Days field has been populated

• Strike Price (67): FX rate/price at which the contract can be exercised or assigned

• Option Type (1142)

  • American: contract can be exercised or assigned at any time until expiration, assuming the strike price has been reached

  • European: contract can be exercised or assigned on expiration date only

  • Bermudan: functions the same way as American in Accounting; this option exists for reference data purposes only

• Put/Call Flag (1350)

• Pay Currency (1356)

• Receive Currency (1357)

Trade Processing

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

Open & Close

The fields below are used for both opens and closes.

• Contracts (40): number of contracts being transacted

• Price Per Contract (45): multiplied by Contracts, Contract Size, and Price Multiplier to calculate the premium

• Commission Per Contract (971): this is multiplied by Contracts to calculate Commission Amount Local, which is factored into the net amount

• Tax Amount (46), SEC Fee (48), Stamp Duty Tax (51), Other Fee (3752): these are added to the premium and commission to generate the total net amount

• Settlement Currency (63): if an FX Option’s trade premium settles in a currency that differs from its Asset Currency, this must be changed to the appropriate currency

• Broker (88)

Accounting

Once an FX Option 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 STAR to PACE. These can be scheduled or triggered manually.

• 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

Valuation

FX Options are valued using unit prices. The market value formula is:

• Market Value = # of Contracts * Contract Size * Price * Price Multiplier

Exercise/Assign

Exercises and assignments are processed using Book Trade > Other > Currency Option Cash Exercise or Currency Option Physical Exercise. By definition purchased FX Options are exercised and written FX Options are assigned, but they use the same process in Accounting.

Settlement

FX Options can be exercised or assigned using cash or physical settlement. Cash settlement is simply an exchange of money based on the exercise price. Physical settlement results in spot transactions against the underlying pay and receive currencies.

Cash Settlement

Purchased (Long) Call or Put

• Cash Receipt = # of contracts exercised * exercise price * Contract Size * Price Multiplier

• Gain (Loss) = # of contracts exercised * (exercise price - open price per contract) * Contract Size * Price Multiplier

Written (Short) Call or Put

• Cash Disbursement = # of contracts exercised * exercise price * Contract Size * Price Multiplier

• Gain (Loss) = # of contracts exercised * (open price per contract - exercise price) * Contract Size * Price Multiplier

Physical Settlement Cash Flows

Purchased (Long) Call or Put

• Sell Currency: Pay Currency from SMF, a disbursement will be created for this amount

  • Disbursement = # of contracts exercised * Contract Size * Price Multiplier

• Buy Currency: Receive Currency from SMF, a receipt will be created for this amount

  • Receipt = (# of contracts exercised * Contract Size * Price Multiplier) / Strike Price

Written (Short) Call or Put

• Sell Currency: Receive Currency from SMF, a disbursement will be created for this amount  

  •  Disbursement = # of contracts assigned * Contract Size * Price Multiplier

• Buy Currency: Pay Currency from SMF, a receipt will be created for this amount   

  • Receipt = (# of contracts assigned * Contract Size * Price Multiplier) / Strike Price

Canceling Exercise/Assign Events

Canceling an exercise or assign event requires the use of Batch Cancel Trades. Query for the appropriate date range, entity, and security, then set Choose Trade to Cancel (962) = the target exercise/assign event. This will roll back the exercise/assign event by removing the actions on underlying currencies and restoring the original position. FX Option trades can be canceled using the regular Cancel Trade panel or rebooked using Cancel & Rebook Trade.

Expire

If the contract is not closed prior, Accounting will expire the FX Option on expiration date plus the number of days defined in the entity’s Options and Futures Expiration Delay Days election.

Reporting

STAR to PACE (S2P)

Almost all reports in Eagle 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 a single row for each FX Option in the POSITION, POSITION_DETAIL, TRADE, and CASH_ACTIVITY tables. The MARKET_VALUE_INCOME column captures the total market value. Cash activity is appropriately signed based on whether the FX Option is bought or written.

Accounting Reports

Eagle has a core set of accounting reports that can be used to review FX Option 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.

Insurance Reporting

Data Management Reporting

Performance

The performance toolkit calculates market value-based performance for FX Options using data supplied by the S2P process. However, this can be misleading because traditional market values do not capture an Option’s true exposure. Exposure-based analyses, which can be implemented using Eagle Enrichment, calculate more meaningful returns. The documentation and .egl files linked below as attachments are available for beta testing. Additional details are available in Exposure Reporting Best Practices and the Eagle Enrichment User Guide 2015.

Automation

Refer to Options Automation Processing Notes for general information about options security setup and trade processing via Message Center.

Sample messages for the standard interfaces are listed below.