TRS Pricing

• TRS are priced at the Return Leg level in Eagle Accounting (Processing Security Type = SWLXEQ or SWLEDB)

• The following Processing Security Types can be stored as underlying securities on the Return Leg:

  • EQCSCS (Common Stock)

  • EQCSPF (Preferred Stock)

  • INXXXX (INDEX)

  • DBIBFD (Interest Bearing Debt Instrument)

Pricing Center

To implement price-from-underlying for TRS, demand must exist for both the underlying security itself and for the Return Leg (SWLXEQ) of the TRS that is being priced. A composited underlying security price must also be available at the target source for the TRS price rule.

For scenarios where the underlying security's currency differs from its parent security, System Parameter 40 controls whether the FX Rate is applied as "divide by" or "multiply by". Eagle Accounting uses "divide by". If your FX rates follow this standard, System Parameter 40 should be set to 1. You can confirm and edit if necessary in System Management Center > System Settings > System Parameters. Locate Sys Item 40. The current value is shown under the Sys Value column. If it needs to be changed, right-click the row, click Edit, update the Value (1 for "divide by" or 0 for "multiply by"), click Save, and cycle the PACE Application Server.

The below process details the Pricing Center configuration, assuming target source prices are already available for the underlying index or security.

Rule

A rule must be created to allow the underlying security's price to be applied to the TRS's Return Leg.

• Under Price Rules, click Create
  
  

  Open

  

• Give the rule a Name, select the Target Source, and click Define to enter the Security Criteria

  • The criteria should include the type(s) of return leg(s) that will be priced AND the types of underlyings

  • An example is shown below that should cover all scenarios
    
    

    Open

    

• Click Price Rule Options and check the box for Create Demand for Underlying Securities

  • This will ensure demand is created for the underlying security even if it is not held directly

  • A price rule must still exist for the underlying security type to perform the actual pricing
    
    

• In the Entity Criteria tab, select the applicable entities and/or entity lists

  • While this is not required, it is strongly recommended due to the breadth of the security criteria
    
    

• In the Field Selection tab, set Field Name to Price

  • You can right-click the source hierarchy rule to create or edit a new one to assign to the rule

  • The source chosen in the source hierarchy rule will be overridden by the Price Adjustment, so any source can be used if you will always be pricing your TRS from their underlyings
    
    

• Create a Price Adjustment to assign the underlying price to the TRS return leg

  • Type = Calc Price from Underlying Security

  • Define Target Security Criteria as all TRS return legs or a subset that meets your business requirements

  • Set Price Source to the target source for the underlying security

  • Set Price Field to the field holding the composited price for the underlying security

  • If the underlying is priced in a different currency, populate FX Source, FX Field, and FX Date Rule to convert it to the TRS currency
    
    

• Define Target Security Criteria for the Price Adjustment
  
  

• The Priority can be either Override or Underlay

  • Override: the price adjustment source will override any source in the source hierarchy

  • Underlay: the rule will first look for a validated price within the source in the source hierarchy rule, and if none is available, it will look to the price adjustment

Execution

After the Price Rule has been created it can be submitted.

• Note: the securities being priced must be pushed to Data Management via STAR to PACE before the rule is submitted

There are three steps to the price calculation process:

• Create demand using the price rule

• Validate using the validation rule

• Push to target using the Calculate Price Values function in the price rule

To create demand, select the rule and click Submit at the top of the screen

• Check the Create Security List box, then click OK
  
  

After this is complete you should be able to see a demand record for the TRS Return Leg on the original source. Next, submit your Price Validation Rule.

• If a validation rule already exists that includes TRS Return Legs it can be run

  • If not, create a simple validation rule for the TRS equity leg with the desired validations

• Finally, once the validations have been run, rerun the Price Rule with Calculate Price Values selected

  • This will push the priced Return Leg of the TRS to the target source so it is available for use