Entity Setup

Before any trades can be booked, the target entity must be set up appropriately.

Reference Data

Storage & Configuration

Using Eagle's FX Option functionality, the security master file (SMF) will be a single row in Data Management.

Market Data

While Boosted TARFs are typically traded over the counter, their valuation and payouts are determined by market FX rates. Ensure you are you using the correct FX rate source as specified in the terms of your contract.

Security Data

Boosted TARFs can be set up and maintained in Issue Viewer, Security Reference Manager (SRM), or Reference Data Center (RDC). The list below contains all fields required to configure a Boosted TARF SMF.

• Issue Name

• Primary Asset ID & Type

• Processing Security Type: OPOPCR

• Price Multiplier = 1.00

• Contract Size = 1.00

• Issue Country

• Asset Currency

• Expiration Date: last Valuation Date (10/6/2017 in attached example)

• Strike Price: Strike Rate from contract (1.2771 in attached example)

• Option Type = American (allows for exercise prior to expiration date)

• Put/Call Flag = Call

• Pay Currency: enter Reference Currency if you are Reference Currency Seller, otherwise enter alternate currency (USD in attached example)

• Receive Currency: enter Reference Currency if you are Reference Currency buyer, otherwise enter alternate currency (CAD in attached example)

Trade Processing

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/settle dates and click Submit to query for the security. Right-click it and select Open. The lists below contains all fields required to book a Boosted TARF trade.

See attached spreadsheet for examples of the initial trade and reopens on subsequent Valuation Dates.

Net Option Positions = No or Yes

Regardless of the entity election, only the buy and sell transactions should be used. Boosted TARFs do not need to be sold short.

Open > Buy

This creates a long position.

• Contracts = Notional Amount (enter full notional because Contract Size = 1.00)

• Price Per Contract = zero (no cash is exchanged upfront for Boosted TARFs)

• Commission Per Contract: enter if applicable; this is multiplied by Contracts to calculate Commission Amount Local, which is factored into the net amount

• Tax Amount, SEC Fee, Stamp Duty Tax, Other Fee: these are added to the premium and commission to generate the total net amount

• Broker

Close > Sell

This closes (partially or fully) a previously established long position, using the same fields as above.

Accounting

Once a Boosted TARF position has been established it will be picked up in Eagle’s global workflow. Accounting valuation is calculated when posting unrealized gain/loss and Data Management valuation is calculated in STAR to PACE.

• These can be triggered manually via Global Process Center

  • Accounting Valuation: Unrealized Gain Loss Entries > Post Daily Fund Unrealized Gain Loss-Position

  • Data Management Valuation: Eagle STAR to Eagle PACE Direct Processing > Transfer Data - Batch

Valuation

Boosted TARFs must have prices supplied as clean unit prices. The market value formula is:

• Market Value = # of Contracts * Contract Size * Price * Price Multiplier

  • In this case Contract Size and Price Multiplier both = 1.00

  • The price supplied to Eagle should be a reflection of the market rate vs. Strike Rate

Exercise/Assign

Exercises are processed using Book Trade > Other > Currency Option Physical Exercise. This process allows the exact cash settlement amounts to be entered for each currency.

Settlement

Physical settlement results in spot transactions against the underlying pay and receive currencies.

Physical Settlement Cash Flows

These amounts will be based on Notional Amount, Boosted Notional Amount, or Final Notional Amount depending on the market rate on each Valuation Date. See attached  spreadsheet for exact amounts entered in each field for different scenarios.

• Sell Currency: Pay Currency from SMF, a disbursement will be created for this amount

• Buy Currency: Receive Currency from SMF, a receipt will be created for this amount

Canceling Exercise/Assign Events

Canceling an exercise or assign event requires the use of the Batch Cancel Trades panel. Query for the appropriate date range, entity, and security, then set Choose Trade to Cancel = the target exercise/assign event. This will roll back the exercise/assign event by removing the actions on underlying currencies and restoring the original position. Boosted TARF trades can be canceled using the regular Cancel Trade panel or rebooked using the Cancel & Rebook Trade module.

Expire

If the contract is not closed prior, Accounting will expire the Boosted TARF on expiration date plus the number of days defined in the entity’s Options and Futures Expiration Delay Days election.

Reporting

STAR to PACE (S2P)

Almost all reports in Eagle leverage data from the Warehouse, 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 CLO in the POSITION, POSITION_DETAIL, TRADE, and CASH_ACTIVITY tables. The MARKET_VALUE_INCOME column captures the total market value.

Accounting Reports

Eagle has a core set of accounting reports that can be used to review Boosted TARF 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 calculates market value-based performance for Boosted TARFs using data supplied by the S2P process. However, this can be misleading because traditional market values do not capture a Boosted TARF’s true exposure. Exposure-based analyses, which can be implemented using Eagle Enrichment, calculate more meaningful returns.

Exposure

Exposure reporting and analysis are available in the product suite, but some accounting data must be augmented via Eagle Enrichment. Please contact Instrument Engineering for more implementation information based on your specific requirements. Additional details are also available in Exposure Reporting Best Practices and the Eagle Enrichment User Guide 2015.

Automation

Boosted TARF security master files (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 the Generic Streams and Data Uploaders Reference Guide for more information.

• When Net Option Positions is set to Yes, short positions are maintained using standard Buy and Sell transactions

• When Net Option Positions is set to No, short positions are maintained using Write and BuytoCover transactions; to process such trades through Message Center, the event type must set to WRITE or BUYCVR