Reset Total Return Swaps

In the Reset Total Return Swap panel, the system uses all of the information in the Security Master File or the Coupon/Reset type schedule, if available, to determine the day's price used to reset the swap, generate the payment, and reset the notional. The reset process recalculates the accruals to date if the coupon on the accrual leg is not paid at the same time.

For a security identified as a forward starting total return swap, on the Effective date of the security, the reset process recognizes the position is forward starting, and the reset adjusts the position to set the correct units and notional amount. The system does not create a cash record.

The swap's Notional Reset Type value determines if the system adjusts the total return swap's finance leg at reset or whether it accrues on the original notional for the life of the swap, This option affects the total return swap during the reset process as follows:

• Constant Notional (C). Identifies the Total Return swap as a constant or fixed notional swap. Resets do not change the notional amount on the finance leg, and the finance leg accrues on the original notional for the life of the swap. The system does not adjust the notional cost, but tracks adjusted shares in order to correctly calculate unrealized and future resets.
• Recalc Notional (R). Identifies a Total Return swap where resets do change the notional amount on the finance leg.
• Constant Notional - Forward (CF). Identifies the Total Return swap as a constant or fixed notional swap for a swap that is a forward starting swap. If you booked the trade, set the Notional/Units option to Enter Notional, and then entered the notional amount in the Notional field, the system assigns the Notional amount to the units of the equity and finance leg. Resets do not change the notional amount on the finance leg, and the finance leg accrues on the original notional for the life of the swap. The system does not adjust notional cost, but tracks adjusted shares in order to correctly calculate unrealized and future resets. 
• Recalc Notional - Forward (RF). Identifies a Total Return swap where resets do change the notional amount on the finance leg for a swap that is a forward starting swap. If you booked the trade, set the Notional/Units option to Enter Units, and then entered the equity leg units in the Shares field, the system assigns the equity units to the finance leg. The reset process creates a units adjustment to the equity leg and creates a notional units adjustment to the finance leg. The system does not create a cash payable or receivable.

To reset a total return swap:

1. In Accounting Center, in the left navigation pane, click Processing and Exceptions > Global Processes > Swaps > Reset Total Return Swap.
   You see the Reset Total Return Swap panel.
2. Complete the options on the Reset Total Return Swap panel.
3. Click Submit.

Reset Total Return Swap Panel Options

The following are the options in the Reset Total Return Swap panel. You can use this panel to reset a total return swap. Note options may vary according to your selections.