Overview
This document applies to all releases of Eagle software. Version-dependent functionality is noted with the initial release(s) it became available.
Forward Contracts (Forwards) allow two parties to buy and sell assets, most often currencies, at given prices on a specified future date. Eagle supports end-to-end processing of Forwards in V11.0 and all subsequent releases. This document covers the full lifecycle including Accounting, Data Management, and Performance. Refer to Bond Forwards (BFWD) Best Practices for information about processing Forwards on fixed income securities.
Non-Deliverable Forward (NDF) Contracts are FX transactions used as hedging mechanisms where a currency is so thinly traded that it cannot be physically delivered at expiration. Instead, it is replaced by a settlement between counterparties for the net profit/loss on the contract, calculated using the prevailing "spot fixing rate" from two days prior. The settlement occurs in a predetermined deliverable currency, often USD. Because NDF Contracts are similar to traditional Forwards until they reach "fixing" and settlement dates, Eagle’s core Forward functionality can also be leveraged for NDF Contracts, with some minor additional processing for fixing and rolling forward.
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:
Forward:
NDF Contract
On this page
Related content
Entity Setup
Before any trades can be booked, the target entity must be set up appropriately. Refer to Forwards Entity Setup Processing Notes for details.
Reference Data
Storage & Configuration
Eagle models Forward security master file (SMF) as two separate rows in Data Management, each with its own Security Alias (10), linked by a common Primary Asset ID (14). One row represents the buy side and the other represents the sell side.
Review the required configurations below for processing Forwards in Eagle Accounting.
Eagle is configured to allow duplicate cross reference identifiers for Forwards
This is required because Forwards in Eagle consist of two security master records that share a common Primary Asset ID (14)
This is done via Add Security Cross Reference Configuration
A Feed Type (1167) of
BFXexists in the list of Accounting Feed TypesIf it does not, one can be added using Add Feed Type
The entity's FX Source (1344) has a Feed Type of
BFXlisted as part of its Interface DetailsIf it does not, this can be added using Add Interface Details
Market Data
There are two options for pricing Forwards in Eagle. The first is to load prices the same way as other securities, except values are required on both legs. The other option is to have Eagle calculate prices based on prevailing spot FX rates and forward points, using either Prices and Exchange Rates Center or Pricing Center. Refer to the Valuation section for details about this process.
Security Data
There are also two options for setting up Forwards in Eagle depending on your entity-level value of Forward Security Exists. The first is to create SMFs before processing trades, the same way as other securities (Forward Security Exists = Yes). The other is to create SMFs on the fly at the time of trade booking (Forward Security Exists = No). Refer to the Trade Processing section for details about the latter workflow
Forwards can be set up and maintained using Issue Viewer, Security Reference Manager (SRM), or Reference Data Center (RDC). Some data is shared across the legs, while other fields can be unique. Some tag numbers differ between Issue Viewer/SRM and RDC due to architectural differences.
Shared
Primary Asset ID Type (1432)
Primary Asset ID (14)
Processing Security Type (3931) =
FWXXXXSettlement/Expiration/Maturity Date (38)
Match Broker Indicator (3913): specifies whether the broker is used in the matching criteria for forward trading; select
Noif Forward Position by Broker is set toNoon your entity, orYesif it is set toYesWhen set to
Yesyou also have to populate the Broker (8f8), which gets included in the Issue Name concatenation
Sell Side
Issue Name (961): concatenated automatically
Currency (85 or 363)
Alternate Asset ID (1795) and Type (5501)
FWDXREF (11449 or 1952)
Internal (1976 or 1955)
Buy Side
Issue Name (961 or 1104): concatenated automatically
Currency (85 or 313)
Alternate Asset ID (1795 or 2294) and Type (5501 or 2292)
FWDXREF (11449 or 2300)
Internal (1976 or 5300)
NDF Contracts should be set up with the true non-deliverable currency on the buy or sell side.
Trade Processing
There are two options for trading Forwards in Eagle depending on your entity-level value of Forward Security Exists.
Yes: you must query for the SMF you set up in advanceNo: you must query for the currency SMF to be bought or sold (CASHGBP,CASHEUR, etc.)
Trades are entered using the Book Trade module once entity and reference data have been configured. Enter the appropriate entity, security identifier (for the Forward SMF or the currency SMF), and trade (35)/settle (37) dates and click Submit to query for the security. Right-click it and select Book Foreign Exchange > Buy Currency - Forward Contract or Sell Currency - Forward Contract (you will only see the latter option if Forward Security Exists = Yes).
Forward Security Exists drives the data requirements at trade time as well. If it is set to No, you must enter the fields from the Security Data section in addition to the fields listed below. This also provides the option to create a unique Primary Asset ID automatically by setting Process For Creating Primary Asset ID (2284) = System Generated.
Sell Quantity (366)
Buy Quantity (316)
Commission Amount Local (47)
Other Fee Local (3752)
Fee Settlement Date (9357)
Settlement Currency (63): defaulted based on the entity-level Forward Settlement Currency, but can be overridden
Broker (88)
NDF Contracts
Open
NDF Contract open trades should be booked just like any other Forward.
Fixing
On fixing date, an offsetting transaction must be entered for the non-deliverable currency to a) prevent any cash settlement of the non-deliverable currency and b) determine the net settlement amount of convertible currency. This transaction should have Trade Date = fixing date and Settlement Date = original Settlement Date. Both of the attached NDF spreadsheets show examples.
Roll
NDF Contracts can be rolled forward prior to the fixing date to extend the settlement date out into the future. This is done by entering an offsetting transaction as described in the Fixing section above with Trade Date = roll date, combined with a transaction in the original direction with Trade Date = roll date and the new Settlement Date. The Roll 5-27 worksheet of shows an example.
In the example with a roll, two fixing transactions must be entered on fixing date: one to offset the original NDF, and another to offset the roll date offset. These are the steps from the example, which assumes Forward Close Eligible = No. The name of each trade is in the Security Type column of each report.
We start by booking NDF (May 5)
On roll date (May 27), we book NDF ROLL FORWARD with the new Settlement Date, and we book NDF SPOT to offset NDF
This prevents double counting during valuation
On fixing date (May 31), we book NDF FIXING to offset NDF, and NDF SPOT FIXING to offset NDF SPOT
This prevents cash from settling in the non-deliverable currency
On the original Settlement Date (June 2), both pairs of the offsetting transactions (
NDF|NDF FIXINGandNDF SPOT|NDF SPOT FIXING) are reduced to zero and realized gain/loss is locked in for the original trade and settled in the deliverable currencyThe end result is NDF ROLL FORWARD outstanding with the new Settlement Date (July 2)
Cancel & Rebook
Faulty Forward transactions can be cancelled using Cancel Trade, with the transaction rebooked using Book Trade. Forwards are not supported in Batch Cancel Trade or the Cancel & Rebook Trade process.
Modify Cancel Accounting Date can be used to change the accounting date associated with a cancel
Accounting
Once a 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 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
Maturities: Expirations & Maturities > Run Forward Contracts Maturity
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
Maturities: Expirations > Mature Forward Contract
Valuation
Eagle Accounting includes functionality to interpolate Forward prices based on spot and forward rates/points (both are supported). When the same Forward SMF is traded in multiple funds with different base currencies, the entity-level Forward Price Source (2920) allows Eagle Accounting to calculate accurate valuations across all funds (refer to the Entity Setup section for additional information).
If Forward prices are sourced externally, they can be loaded directly to the entity's Forward Price Source for the appropriate leg(s). If you are using the default Eagle sources, you would load the prices directly to 4 GBP, for example. If you are using custom sources, you would load the vendor prices directly to those sources.
When viewing reports, forward prices are shown in the FX Rate (96) column
The leg that matches a fund's base currency always has an FX Rate of
1.00, while the other leg is the pricing legBoth legs are pricing legs for Cross Currency Forwards (where the two currencies differ from a fund's base currency)
Price (481) is always shown as
1.00This applies to interpolated and vendor-provided prices
Prices can be loaded like any other security using the Closing Price (481) field in Add Issue Price, but they are moved to the FX Rate field during STAR to PACE
To interpolate Forward prices in Eagle, you must use either Pricing Center or Prices and Exchange Rates Center. In either case, ensure the following have been completed first.
A Feed Type of
BFXexists in AccountingIf it does not, it can be added as described in the Storage & Configuration section near the beginning of this document
The entity-level FX Source has a Feed Type of
BFXlisted as part of its Interfaces Details; this can be added using Add Interfaces DetailThe entity-level elections for Forwards have been populated: Forward Price Source, Forward Position by Broker, Forward Close Eligible, Forward Settlement Currency, and Forward Security Exists
Note: these fields are not marked as required on the entity setup and there are no defaulted values
The Forward SMF exists, either from being set up in advance or created on the fly at trade time
The Forward is held in at least one entity
Pricing Center
Pricing Center differs from Prices and Exchange Rates Center in its data requirements for deriving a price. Pricing Center does not require the lower bound point to be loaded; instead, it substitutes the spot rate as the lower bound. Refer to Using Pricing Center for Forward Contracts for step-by-step details about the process.
You have complete flexibility to store forwards points to any level of granularity you desire. The industry standard is a spot rate plus 7-, 30-, 60-, 90-, 180-, 270-, and 360-days. You can also store weekly/monthly points. Once Pricing Center calculates the days to maturity of the forward, it gets the two closest lower and upper bound points available.
Pricing Center has two formulas available for pricing forwards. These are controlled by PACE System Setting 169. A value of 0 invokes the Fixed Periods formula, while a value of 1 invokes Actual Calendar Days, as shown below. This setting can be checked and changed in System Management Center > System Settings > System Parameters.
Fixed Periods = spot + lower bound point + ((upper bound point - lower bound point) * ((days to maturity - lower bound days) / (upper bound days - lower bound days))
Days to Maturity = settlement date AKA maturity date - valuation date
Days to Maturity Offset can be used to push out the effective valuation date used in the calculation on a per currency pair basis
Example: valuation date = 7/12/2021, settlement/maturity date = 8/25/2021, GBP to USD offset = 2, and GBP to EUR offset = 1
Days to Maturity = 8/25/2021 - 7/12/2021 = 44
GBP to USD Days to Maturity = 44 - 2 = 42
GBP to EUR Days to Maturity = 44 - 1 = 41
Refer to https://eagledocs.atlassian.net/wiki/spaces/IE/pages/1842217109/Using+Pricing+Center+for+Forward+Contracts#Before-You-Start for more information about Days to Maturity Offset
Actual Calendar Days = spot + lower bound point + ((((spot + upper bound point) - (spot + lower bound point)) / (upper bound date - lower bound date)) * (settlement date AKA maturity date - lower point date))
The Pricing Center process uses Exchange Rates - FX Rules to create demand for the original source and Exchange Rates - FX Validation Rules to move rates to the target source, which then become the basis for price interpolation. These events can be triggered manually, or scheduled to run as part of your daily workflow. Message Center streams to load exchange rates into Pricing Center are available in CSV and STAR formats: eagle_default_in_csv_pc_addfx and eagle_default_in_star_pc_addfx.
Prices and Exchange Rates Center
Prices and Exchange Rates Center was retired in V17 in favor of Pricing Center and its improved functionality. The information below is provided for clients on earlier versions of Eagle Accounting.
The rates and points Accounting uses to calculate forward prices can be loaded using the Window > FX Rates screen. Enter the Exchange Rate Source, To Currency Symbol, From Currency Symbol, and Effective Date and click SEARCH to submit the query. To Currency is the pricing currency (it should match entity-level Forward Price Source) and From Currency is the local currency of the leg. Effective Date is the date for which you are pricing.
If no spot rate or points have been loaded for the Effective Date, you will see a Tolerance Status of MissingFxRate. Enter the spot rate and points (7-, 30-, 60-, 90-, 180-, 360-, and 720-day) and click Save Changes, after which the Tolerance Status should change to FxRate Success.
If a spot rate already exists for query criteria, it will be pulled into this screen
The day-over-day spot rates are verified against each other; entering an unrealistic rate may result in a Tolerance Status of
FxRate FailureThis can be overridden if necessary
Points can be negative
Only the points for the lower and upper bounds are required, the rest are optional to improve accuracy
For example: if the number of days to maturity for a given Forward is 144 days, only the 3- and 6-month points are required to calculate the price
Forward Pricing Trigger
After the spot rate and points have been entered, the calculation can be triggered using the standalone Forward Pricing screen. This uses the ESTAR.PKG_ESTAR.INSERT_UKNOWN_PRICE stored procedure.
Reprice Flag (1844)
NoorNULL: prices will only be calculated for Forwards with no price or a zero priceYes: allows repricing of Forwards that already have a price, if a spot rate or points changed, for exampleThis requires populating Currency to be Repriced (85), which will cause all held Forwards against that currency (both buy and sell) to be repriced
Calendar Days Method (1257)
No: calculation assumes fixed forward point periods, such as 30-, 60-, or 90-daysYes: calculation uses actual calendar days between Effective Date and Settlement/Expiration/Maturity DateThis requires populating Calendar Name (1941)
Once prices have been calculated, they can be viewed via the Window > Forwards screen. In this window, Forward Source is the entity’s Forward Price Source, not its FX Source. Successful pricing is indicated by a Tolerance Status of Forward Success. The calculated prices are stored in the PRICE table.
Forward Pricing Formula
Prices and Exchange Rates Center interpolates forward prices using the below formulas:
IF DAYS <= 7 THEN (spot rate + 0 + (7day point - 0) * (days - 0) / (7 - 0))
IF DAYS <=30 THEN (spot rate + 7day point + ((30day point - 7day point) * (days - 7) / (30 - 7)))
IF DAYS <=60 THEN (spot rate + 30day point + ((60day point - 30day point) * (days - 30) / (60 - 30)))
IF DAYS <=90 THEN (spot rate + 60day point + ((90day point - 60day point)* (days - 60) / (90 - 60)))
IF DAYS <=180 THEN (spot rate + 90day point + ((180day point - 90day point)* (days - 90) / (180 - 90)))
IF DAYS <=360 THEN (spot rate + 180day point + ((360day point - 180day point) * (days - 180) / (360 -180)))
IF DAYS >360 THEN (spot rate + 360day point + ((720day point - 360day point) * (days - 360) / (720 - 360)))
After the price has been calculated, it is moved to the FX rate column and a price of 1.00 is is used for positional data to reflect any change as currency gain/loss.
In addition to the full walk-through example attached, there are two additional spreadsheets demonstrating the pricing calculations. includes multiple different currency pairs, while
shows two different valuation dates for a single contract.
Cross Currency Forwards
Similar steps should be followed to price Cross Currency Forwards (where the two currencies differ from a fund's base currency). The only difference is that two sets of rates/points must be entered. One set is required for each leg against the fund's base currency. Prices are interpolated for both legs, instead of one leg being pegged at 1.00.
If vendor prices are being used, they should be loaded directly to the entity's Forward Price Source for both legs.
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 two rows for each Forward in the POSITION, POSITION_DETAIL, TRADE, and CASH_ACTIVITY tables. The MARKET_VALUE_INCOME column captures the total market value. The following additional logic is also performed for Forwards:
All local market value fields default to the leg quantity
The price stored in the PRICE table is the one calculated by Pricing Center (or Prices and Exchange Rates Center) to be used to value the leg back to the base currency
Price is set to
1.00in the position and open lot tables
Accounting Reports
Eagle has a core set of accounting reports that can be used to review Forward and other 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.
Insurance Reporting
To categorize derivatives for insurance reporting, such as the Schedule DB, Derivative Elections (56) must be set toHedging Effective, Hedging Other, Income Generation, Replications, or Other on all trades. Leaving the default of Trade will prevent the transaction from appearing on insurance reports.Data Management Reporting
General Reporting (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 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 has full functionality to calculate market value-based performance for Forwards using data supplied by the S2P process. Risk and performance attribution features are available to analyze Forward performance.
Total performance of a Forward is calculated at the leg level
Note: there is an issue with performance when the entity election Forward Close Eligible is set to Yes. Refer to # 2 in the Other Notes section for more details.
Automation
Forward security master files (SMFs) and trades can be loaded through the standard Message Center streams. Unlike other securities, the SMF does not need to be loaded prior to the trade if Forward Security Exists = No. In this case, loading the trade will spawn an SMF (if necessary) in the same way as manual processing. Refer to https://eagledocs.atlassian.net/wiki/spaces/GENERICINTER for more information.
Process For Creating Primary Asset ID (2284) must be set to
System GeneratedEnsure Trade Ticket Number (761) is populated for all Forward trades because it is required to process cancels
FX rates can be loaded via Message Center through the default eagle_default_in_csv_fxrate stream
Other Notes
After posting the unrealized gain/loss, verify that the gain/loss values look reasonable.
Performance issue when Forward Close Eligible is set to
Yes. The Global Professional Services team has created an exporter to correct this issue (refer to our https://eagledocs.atlassian.net/wiki/spaces/IE/pages/1658978542).
0 Comments