TRS on Single-Name Fixed Income Processing Notes

Owned by Jawann Swislow
Last updated: Nov 19, 2024
2 min read

Overview

Total Return Swaps (TRS) on Single Name Fixed Income (SNFI) differ from traditional TRS because the underlying bond’s coupon is included on the return leg. Interest accrues and pays in line with the bond’s coupon schedule rather than the swap’s reset schedule. This is separate from the finance leg accruals.

Support for bullet contracts (one reset at maturity) was added in V17 R.43 and support for resetting contracts was added in V17 R2.44. Additional enhancements were released in V17 R2.49 and V17 R.50.

See Total Return Swaps (TRS) Best Practices for full details on TRS processing in Eagle.

Reference Data

Security Data

Price Multiplier (18) = 0.01

  • Entered on the return leg in Issue Viewer or the contract in Reference Data Center (RDC)

Contract

  • Dated Date (1183): set to Dated Date of the underlying bond

  • Maturity Date (38): set to termination date of the TRS

Return Leg

In addition to the fields listed in the Reference Data > Security Data > Return Leg section of Total Return Swaps (TRS) Best Practices, the accrual-related fields in the Finance Leg section must also be populated for the SWLEDB leg. These fields should match the accruals conventions of the underlying bond, except as noted below.

  • Processing Security Type (3931) = SWLEDB (Swap Leg Total Rate Return on Fixed Income)

  • Last Payment/Valuation Date (474): enter the underlying bond’s last coupon date prior to Maturity Date of the TRS

  • Generate Swap Reset Schedule (2299): defaults to No for SWLEDB because additional data must be provided when generating the schedule

    • In V17 R2.50 and above, separate fields are available on the security master file (SMF) to capture the additional required data when Generate Swap Reset Schedule = Yes and Override Security Master Dates (7171) = Yes

      • This is available in Issue Viewer, CSV messages, and EagleML (EML) messages with accountingValidationFlag = Yes

In V17 R2.49 and above, you can automatically apply the underlying bond details to the return leg when you add the bond as an underlying by setting Use Underlying Bond Details (7200) = Yes. This applies to Coupon (70), Coupon Type (97), Day Count Basis (471), Payment Frequency (472), First Payment/Valuation Date (473), Issue Date (68), and Dated Date (1183). This is available in Issue Viewer, CSV messages, and EagleML (EML) messages with accountingValidationFlag = Yes.

Trade Processing

Open

Enter the full notional/par amount in Shares (40).

Close

In V17 R2.43, you must book a close at the final valuation price instead of processing the final reset. Trade Date and Settlement Date should match the valuation date and settlement date (respectively) of the final reset. This is not required in V17 R2.44 and above.