Dual Currency Securities Processing Notes
Overview
This document applies to all releases of Eagle software V12 and above. This documents covers the details of Dual Currency functionality.
Dual Currency securities are financial instruments which are issued in one currency, but have income and/or principal payments in different currency. These securities accrue in the Asset Currency (85), but pay in a different currency. Before the core Dual Currency functionality was introduced, these securities had to be supported by manually executing spot transactions to convert from local to the settlement currency; that manual intervention is no longer required.
Dual Currency functionality only works for fixed income and bilateral swaps (without variation margin). It does not work for cleared swaps (with variation margin).
Reference Data
Market Data
When loading FX rates for Dual Currency Securities, it is critical they be added as Bid (4477), Ask (947), or Last (96) rates as defined in FX Rate Type (11817) on the security setup.
Security Data
The security master fields listed below are used to drive Dual Currency functionality for eligible securities.
Asset Currency (85): currency in which the security will accrue and be valued
Settlement Currency (63): default trade settlement currency, which can be overridden at trade time
Income Currency (1186): currency in which coupon payments will settle
Cannot be changed between pay periods
Dual Currency Indicator (11802) =
Yes
Dual Currency Conversion Factor (11803): stores the initial FX rate at issuance to convert the local currency to settlement currency
Principal Currency (11813): currency in which the security pays principal
Currency in which corporate actions and maturities will settle
Must match either Asset Currency or Income Currency
Cannot be changed between pay periods
Settlement Rate Option (11816): FX source to convert local amounts into settlement currency
FX Rate Type (11817): defines which FX fixing rate to use from the Settlement Rate Option; valid options are
Ask
(A),Bid
(B), andLast
(L)FX Fixing Period Multiplier (12027): number of periods to look back or forward
Can be negative (look back) or positive (look forward), but cannot be zero or null
For example: -1 invokes a 1 period lookback
FX Fixing Period (11818): length of the fixing period (
Day
,Week
,Month
, orYear
), also referred to as lookback daysFX Fixing Period Date Type (12028): defines if the fixing period uses
B (Business)
orC (Calendar)
daysBusiness can only be used if FX Fixing Period =
Day
Calendar is used by default when FX Fixing Period =
Week
,Month
, orYear
Fixing Business Day Convention (12029): used in conjunction with FX Fixing Period to determine how the date is adjusted if it falls on a non-business day
Following
: adjusts the fixing date to the following business dayNone
: if FX Fixing Period Date Type is set toBusiness
, this field shows the value asNone
, and ifCalendar
is selected, it must be a value other thanNone
Preceding
: adjusts the fixing date to the previous business day
FX Fixing Business Center (12340): when FX Fixing Period Date Type =
Business
, this field identifies the business calendar used to calculate fixing period start and end datesFX Fixing Date Relative To (12341): specifies which date is the anchor for selecting FX rates
Payment Date
: for income and principal payments, all the FX fixing parameters are applied to settlement dateCalculation End Date
: fixing parameters are applied to the last accrual date of a coupon period, or the effective/termination date of the principal transactions
Trade Processing
Trades are entered using Book Trade, similar to any other fixed income securities. In case of swap transactions when the Settlement Currency (63) does not equal local currency, Settlement Amount (64) must be entered manually.
Accounting
Once a Dual Currency security position has been established it will follow all core Eagle Accounting processes.
Other Notes
If Principal Currency is different than Asset Currency, the security will calculate principal in the Asset Currency, and convert local currency amounts to Principal Currency at the time of the maturity or any corporate action. All the calculations will be based on the parameters defined.