Storing & Linking Future Deliverables

Best Practices Guide

Last Update: 7/23/2017

OVERVIEW

Sellers of Bond Future Contracts have an option to deliver the cheapest bond to cover the short Future Contract position, typically referred to as ‘cheapest to deliver’. For every Future Contract there is a set of possible candidates that have similar attributes. Based on these attributes, one will be the cheapest to deliver. This can change daily or intraday based on interest rate fluctuations.

STORING DELIVERABLE BONDS

Create individual securities for each of the deliverable bonds. Since these are actual bonds, these are probably set up in client database.

Tracking the list and factors: is there is a need to track historic deliverable list and factor?

• If Yes:
  • Create an entity to represent the future deliverables with entity_type ‘INDX’.
  • Load the daily list of cheapest to deliver bonds and factors as holding in the position/position details table for this entity. There will a list of bonds and factors every day in the position for this entity.
  • Select a field on the position_detail table to load a flag to denote the cheapest to deliver from this list. Typically, on any given day only one of the deliverable is the cheapest to deliver.
  • For the future security, load security_master_detail.look_thur_ind = 'P' (standing for portfolio) and look_thru_value = “Future deliverable entity".
  • When an OLAP reports is run for the fund holding the Future an eye glass will appear next to the future. When the user clicks on the eye glass PACE will run another OLAP report to pull the holdings of the Future deliverable entity. This list will show the cheapest to deliver bonds and its factors.
• If No:
  • To track the current day’s deliverable list and factors, load the underlying security table with this list. This list will get purged every day with a new list.
  • One of these rows will be marked as cheapest to deliver.

Sample Data from Bloomberg

EF7648597|;2;3;2;4;135087YR Corp;2;.8326;4;135087YF Corp;2;.8744;4;135087YL Corp;2;.8797;|

In this example, the Cheapest to Deliver CUSIP is EF7648597. The deliverable bond CUSIPs are found in the next field, followed by the conversion factors.