ENTITY SETUP

Before any trades can be booked, the target entity must be set up appropriately.

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 BFX exists in the list of Accounting Feed Types

  • If it does not, one can be added using Add Feed Type

• The entity's FX Source (1344) has a Feed Type of BFX listed as part of its Interface Details

  • If 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) = FWXXXX
  • Expiration/Maturity Date (38)
  • Match Broker Indicator (3913): specifies whether the broker is used in the matching criteria for forward trading; select No if Forward Position by Broker is set to No on your entity, or Yes if it is set to Yes
    
    • When set to Yes you also have to populate the Broker (88), 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 advance
• No: 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 Forward 5-27 worksheet of the attached NDF Lifecycle.xlsx spreadsheet 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:

• We start by entering NDF A
• On roll date, we book NDF B to offset NDF A, and we book NDF C with the new Settlement Date
• On fixing date, we book NDF D to offset NDF B, and we book NDF E to offset NDF C
• On the original Settlement Date, both pairs of the offsetting transactions are reduced to zero and realized gain/loss is locked in
• The end result is NDF C outstanding with the new Settlement Date

Cancel & Rebook

Faulty Forward transactions can be cancelled using Cancel Trade or Batch Cancel Trade, with the transaction rebooked using Book Trade. Forwards are not supported in 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 appropriate leg(s) based on Forward Price Source. 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
  • Price (481) is always shown as 1.00
  • This 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.

1. A Feed Type of BFX exists in Accounting
   1. If it does not, it can be added as described in the Storage & Configuration section near the beginning of this document
2. The entity-level FX Source has a Feed Type of BFX listed as part of its Interfaces Details; this can be added using Add Interfaces Detail
3. The 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
   1. Note: these fields are not marked as required on the entity setup and there are no defaulted values
4. The Forward SMF exists, either from being set up in advance or created on the fly at trade time
5. 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 determines the days to maturity of the forward, it gets the two closest lower and upper bound points available.

• Standard Formula = spot + point of lower bound + (point difference between lower and upper bound * (day range left over after getting to lower bound / total days in segment))

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.

Cross Currency Forwards

Similar steps should be followed to price cross currency forwards, where both currencies differ from the base currency of a fund. The only difference is that two sets of rates and points must be entered. One set is required for each leg against the pricing currency, as indicated by the entity's Forward Price Source.

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 1.00 in 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 to Hedging 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 (MC) 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 Supported Generic Interfaces V17 for more information.

• Ensure Trade Ticket Number (761) is populated for all Forward trades because it is required to process cancels
• FX rates can be loaded via MC through the default eagle_default_in_csv_fxrate stream

OTHER NOTES

1. After posting the unrealized gain/loss, verify that the gain/loss values look reasonable.
2. 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 TRADEFWD performance_flow_descr Issue Processing Notes).