Overview

Participatory Notes (P-Notes) are issued to overseas investors who want to trade in securities listed on the Indian stock markets. Each P-Note unit represents one (or more) units of the Indian security, and the holder is entitled to any dividends or capital gains collected from it. P-Notes originate from registered foreign institutional investors - who make the actual trades in local markets - and are delivered to overseas investors in lieu of the Indian security.

Eagle recommends setting up P-Notes as hybrid securities (hybrids). The daily workflow is identical to other securities in Eagle, so this document focuses on the unique aspects of P-Note processing.

Example reference data screens and trade screens are attached:

Reference Data

Storage & Configuration

A P-Note is based on an underlying Indian security, which can be set up ahead of time and linked to the P-Note for reporting purposes.

Security Data

P-Notes can be set up and maintained in Issue Viewer, Security Reference Manager (SRM), or Reference Data Center (RDC). Hybrids are modeled as common stock securities, but can include fixed income data elements as well. Other than basic identifier and country information, the following fields define Eagle’s recommended setup for P-Notes.

• Processing Security Type: EQCSCS

• Hybrid Flag: Yes

• Underlying: identifier of Indian security

• Conversion Ratio: dividend pay-out ratio, if available

• Issue Price: ‘Price @ Issue’

• Issue Date: ‘Announcement Date’, first date trades can be booked

• Dated Date: ‘1st Settle Date’, first date trades can settle

• Maturity Date: ‘Maturity’

Conversion Ratio and the fixed income fields are for reference/reporting only and will not drive any Accounting processing unless a Security Processing Rule is defined (which should not be done for P-Notes). The security can still be traded prior to Issue Date and will not be taken off the books on Maturity Date.

A number of validations will be triggered in SRM for missing fixed income information. P-Notes should either be excluded from the validation process or have the validations overridden because the missing data elements are not required to process P-Notes as hybrids.

Trade Processing

Trades can be entered using the Book Trade module once the reference data has 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 > Buy.

• Shares: number of units

• Price Per Share: trade price

• There are several fields that can be used to enter any fees or commissions, if applicable

Accounting

Once a P-Note position has been established it will be picked up in Eagle’s global workflow. There is no special processing required.

Valuation

The value of a P-Note is calculated using the formula below:

• Market Value = # of Units * Quantity Scale * Price * Price Multiplier

Quantity Scale and Price Multiplier will both be set to 1.00.