Example reference data screens, trade screens, and reports are attached:

Entity Setup

Before any trades can be booked, the target entity must be set up appropriately. Refer to Swaps Entity Setup Processing Notes for details.

Reference Data

Storage & Configuration

Eagle has modeled each CDS security master file (SMF) as a single row in Data Management.

All CDS positions are held long (positive units) in Eagle, with buying or selling protection defined on the security master file (SMF) rather than the trade. All securities and positions need to have this indicator populated SMF, where it will then be automatically pulled into the trade panel.

Market Data

Since the CDS Big Bang in 2009, all new contracts are traded with a fixed interest rate of 1% or 5%. Pricing in Eagle Accounting is done on a par-zero basis (prices around zero rather than 100), so par-based prices will have to be adjusted to generate the appropriate valuations in Eagle. Refer to CDS & IRS Vendor Pricing Best Practices for more information on adjusting par-based prices.

Security Data

CDSs can be set up and maintained using Reference Data Center (RDC) or Issue Viewer. The list below contains all fields required to configure a CDS SMF.

• Issue Name (961)

• Primary Asset ID (14) & Type (1432)

• Unique Product Identifier (1955) & Unique Swap Identifiers (1958)

• Processing Security Type (3931) = SWCDCO (Credit Default Swaps)

• Price Multiplier (18): the default of 0.01 will be correct in most cases, but may need to be changed to 1.00 (CDS prices are sometimes supplied having already been multiplied by 0.01)

• Issue Country (1418)

• Asset Currency (85)

• Notional Reset Type (4409) leave NULL

• Premium Indicator (3302): leave NULL

• Buy/Sell Indicator (1364): buying or selling protection is an security-level attribute in Eagle, so two separate SMFs must be created in order to buy and sell protection on the same CDS

  • Buy: buy protection, Pay/Receive Indicator (4590) will default to Accrue Payable

  • Sell: sell protection, Pay/Receive Indicator will default to Accrue Receivable

• Coupon (70): 1.00 or 5.00 (other rates are supported for contracts issued prior to the Big Bang)

• Coupon Type (97) = F (Fixed Rate)

• Day Count Basis (471) = ACT/360

• Payment Frequency (472) = 3_M (Quarterly)

• Business Day Convention (1536)

  • V15 R2 & Above = ADJMBC (Modified Following - Adjusted)

  • Prior to V15 R2 = ADJMBC (Modified Business Day - Adjusted)

• Coupon Day of Month (10551) = 20

• Business Calendar (1480)

• Issue Date (68): first trade date of the swap

• Dated Date (1183): date accruals start, "Effective Date" in ISDA contracts

• First Payment Date (473): enter the actual first payment date, including any adjustment for weekends/holidays based on the Business Day Convention

  • Refer to Calculate Coupon Dates Processing Notes if the adjusted date is not available

• Last Payment Date (474): enter the actual last payment date, including any adjustment for weekends/holidays based on the Business Day Convention

  • Refer to Calculate Coupon Dates Processing Notes if the adjusted date is not available

• Maturity Date (38): date swap expires, "Expiration Date" or "Termination Date" in ISDA contracts

• Cleared Security (5027)

  • No: CDS will follow standard security workflow with periodic coupons generated and valuation based on price * quantity

  • Yes: CDS will follow cleared security workflow with daily exchange of variation margin based on daily accruals and unrealized gain/loss from day-over-day price movement

Trade Processing

Open (event type: CDSOPEN)

Trades are entered using the Book Trade module once the entity and reference data have been configured. Enter the appropriate entity, security identifier, and trade (35)/settle (37) dates and click Submit to query for the security. Right-click it and select Open > Open Swap Contract. The list below contains all fields required to book a CDS trade.

• Traded Interest/Effective Date (2857): date to which traded interest is calculated; typically Trade Date or T+1

  • This should NOT be set equal to "Effective Date" defined in your ISDA term sheet or trade ticket; "Effective Date" should be mapped to Dated Date on the security setup

  • CDS sometimes have Trade Date = Settlement Date, where Traded Interest/Effective Date needs to be T+1 to calculate correct traded interest and accruals

• Select Values to be Calculated by STAR (7000): select Traded Interest to have it calculated, or Calculate None to enter it manually

• Accrual Convention Offset Override (1604): can be used to override the entity value of Accrual Convention Offset (12038) if it is set to Settlement Date + 1

• Data Entry Method (10485): select Enter Price to supply a clean unit price or Enter Total Settlement Amount to supply a value representing all-inclusive trade proceeds (both can be positive or negative)

  • Enter Price: cost (Principal) is calculated as Notional Principal Value * Price * Price Multiplier and Net Amount = Principal + Traded Interest

  • Enter Total Settlement Amount: cost (Principal) is calculated as Total Settlement Amount - Traded Interest and Net Amount = Total Settlement Amount

  • Depending on the type of trade (open or close) and sign of the Price or Total Settlement Amount, Eagle Accounting will post either a premium payment or premium receipt as shown below:

    • Open + Positive Price/Amount = Premium Payment

    • Open + Negative Price/Amount = Premium Receipt

    • Close + Positive Price/Amount = Premium Receipt

    • Close + Negative Price/Amount = Premium Payment

• Notional Principal Value (40): contract notional

• Price (45): typically zero

• Total Settlement Amount (4404): enter all-inclusive trade proceeds, including the effect of traded interest

  • Only available if Data Entry Method = Enter Total Settlement Amount

• Broker (88)

• Counterparty (1144, optional): the counterparty can be selected from a list of all Issuers that have been tagged as counterparties (see Setting Up Legal Entities Best Practices for more information)