Overview

A Dual Currency Deposit (DCD) is a structured product that combines a Time Deposit with a Foreign Exchange (FX) Option. This allows for the repayment of the deposit and accrued interest at maturity in an alternate currency, which is initiated by a “trigger event.” If no trigger event occurs the deposit is repaid in the initial deposit currency. Trigger events typically happen when the local currency appreciates above the strike price on the contract.

Eagle has modeled DCDs using Short-Term Notes (DBIBST) for the deposit and spot FX transactions in the case of a trigger event. While Accounting does not have processing tailored specifically to DCDs, the core fixed income and option contract functionality can be leveraged to model these investments end-to-end in the Eagle Suite.

Entity Setup

There are no unique entity configurations required to trade DCDs.

Reference Data

The Time Deposit (Short-Term Note) piece of the DCD must be set up prior to trading, while the spot FX transaction is entered later at the time of the trigger event. This can be done using Issue Viewer or Security Reference Manager > Add > Fixed Income > Short Term Debt, or Reference Data Center. Below are DCD-specific security details.

• Processing Security Type = DBIBST

• Price Multiplier = 1.00

• Payment Frequency = At Maturity

• Issue Price = 1.00

• First Coupon Date = Maturity Date

• Last Coupon Date = Maturity Date

• Maturity Price = 1.00

Trade Processing

Buy

Buys can be processed using Book Trade > Open > Buy, similar to any other fixed income securities. Par Value should equal the amount of the deposit. The below list captures the absolute minimum data required to book a Short-Term Note in Accounting.

• Trade Date

• Settlement Date

• Select Values to be Calculated by STAR

• Par Value/Current Face

• Price

• Broker

Accounting

Once a DCD position has been established it will follow all core Eagle Accounting processes.

Mature

Short-Term Notes follow Eagle’s core maturity process to model the DCD being repaid in the issued currency (no trigger events). Use Global Process Center > Expirations > Mature to process the maturity.

• Set Maturity Processing Date equal to Maturity Date of the Short-Term Note

• To settle the principal and interest cash at maturity, use Global Process Center > Settlements > Contract Cash

Trigger Event

A spot FX transaction can be booked in the case of trigger event where the deposit is repaid in an alternate currency. There is no security setup required for booking spot transactions, as it is created on the fly. Spot transactions can be booked using the Book Trade module by querying for the CASH security of the repayment currency and selecting Book Foreign Exchange > Buy Currency - Spot Transaction. The following list of data elements is required for booking a spot transaction.

• Example

  • Deposit Currency = USD

  • Repayment Currency = JPY

  • Repayment Amount = 1,000,000 USD

  • FX Rate = 95 (JPY/USD)

• Spot Transaction

  • Sell Currency Symbol = USD

  • Sell Quantity = 1,000,000 (Principal Amount or Principal + Interest on Time Deposit)

  • Buy Currency Symbol = JPY

  • Buy Quantity = 95,000,000 (1,000,000*95)

  • Broker Name = Per contract

  • Broker Code = Per contract

Valuation

Price the Short-Term Note daily with a clean unit price. Accounting calculates the security’s value by using the formula below.

• Market Value = Par Value * Clean Unit Price * Price Multiplier * Quantity Scale

Reporting

STAR to PACE (S2P)

Almost all reports in Eagle 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 single rows for each DCD in the POSITION, POSITION_DETAIL, TRADE, and CASH_ACTIVITY tables. The MARKET_VALUE_INCOME column captures the total market value, inclusive of price fluctuations and period-to-date accruals payable or receivable.

Accounting Reports

Eagle has a core set of accounting reports that can be used to review DCD 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.

Data Management Reporting

Performance

The performance toolkit has full functionality to calculate market value-based performance for DCDs using data supplied by the S2P process. Risk and performance attribution features are available to analyze DCD performance.

Automation

CLO SMFs and trades can be loaded through the standard Message Center streams. The SMF must be loaded prior to the trade (trades do not spawn SMFs). Refer to Supported Generic Interfaces V17 for more information.