About Booking Trades for Mortgage Backed Securities

The system has two fields that exist on the entity and accounting basis level that are specific to MBS securities. These include:

• Gain/Loss on Paydown. The Gain/Loss on Paydown field specifies how the system handles paydowns for gains and losses. If you set the Gain/Loss on Paydown field to No, the system records gains or losses generated by paydowns as accelerated amortization. If you set this field to Yes, the system generates gains or losses on paydowns and displays the Paydown Gain Loss Account field. It is used with the following processing security types:
  –  DBFBFB (Factor Based Debt Instrument)
  –  DBFBPO (Principal Only Factor Based Debt Instrument)
  –  DBFBIO (Interest Only Factor Based Debt Instrument)
  –  DBFBAL (Factor Based Debt Instrument Auto Loan)
  –  DBFBCC (Factor Based Debt Instrument Credit Card)
• Paydown Gain/Loss Account. The Gain/Loss Paydown Account determines whether the gain/loss is posted to the capital or income ledger account.

You can access these fields using the Add/Change Entity panel or the Add/Change a Basis to a Portfolio panel. The system uses the value on the accounting basis table for processing.

Book Open Trades for Mortgage Backed Securities

To manually book an open trade for a mortgage backed security:

1. From any Eagle window, click the Eagle Navigator button to access the Eagle Navigator.
2. Enter Book Trade in the Start Search text box.
3. Click the Book Trade (Accounting Center) link to access the Book Trade tool.
   You see the Query window as the default.
4. Complete the options in the Query window and click Start Search.
5. Select the row with the security you want to trade.
6. Click Open, and click Buy or Short Sell.
   You see the Open MBS/ABS/IO/PO panel.
7. Complete the options on the Open MBS/ABS/IO/PO panel.
8. Click Submit.
   Once the trade is booked, it follows all core accounting processes.

Open MBS/ABS/IO/PO Panel Options

The following are the key options in the Open MBS/ABS/IO/PO panel. Note options may vary according to your selections.

Entity Information

The following are the options for entity information:

• Entity ID (tag 1163). Specifies the unique identifier of the entity.
• Entity Name (tag 1164). Specifies the name of the entity.
• Base Currency (tag 86). Displays the base currency of the entity.

Issue Information

The following are the options for issue information:

• Trade Date (tag 35). Specifies the effective date of the trade. The trade date cannot be greater than the post date, accounting date, or settlement date.
• Accounting Date (tag 36). Specifies the date the trade is reported and has an effect on the entity's holdings and cash balances. The accounting date must be greater than the trade date.
• Monthly Accounting Date (tag 4733). Displays the month end accounting date.
• Settlement Date (tag 37). Specifies the date the trade is settled.
• Event Type (tag 55). Specifies the business intent of the transaction.
• Long/Short Indicator (tag 15). Displays an L (long) or S (short) to indicate whether the position is long or short.
• Cross Reference Type (tag 1234). Specifies the cross reference type associated with the security.
• Issue Name (tag 961). Specifies the name of the security.
• Ticker (tag 13). Specifies the trade ticker of the security.
• Pool Number (tag 1439). Specifies the pool number of the security.
• Cross Reference ID (tag 1233). Specifies the cross reference identifier associated with the security.
• Instrument Type (tag 11). Displays the instrument type.
• Security Type (tag 82). Displays the security type of the asset.
• Issue Currency (tag 85). Displays the local currency of the security.
• Maturity Date (tag 38). Displays the date the final principal payment is due on the security.
• Coupon Rate (tag 70). Displays the rate at which the security accrues interest. It is expressed as an annual rate.

Accounting Information

The following are the options for accounting information:

• Select Values to be Calculated by STAR (tag 7000). Determines whether the system automatically calculates the trade data or allows you to enter it manually. Options include:
  –  Traded Interest/Amort Yield/OID Yield/Trade Yield
  –  Traded Interest/OID Yield/Trade Yield
  –  Amort Yield/OID Yield/Trade Yield
  –  Traded Interest/Amort Yield/Trade Yield
  –  Traded Interest
  –  Amort Yield/Trade Yield
  –  OID Yield/Trade Yield
  –  Calculate None
• Accrued Interest Type (tag 3715). Displays the accrued interest type. The value in this field must be CUM.
• Original Face (tag 41). Specifies the original face value of the security. This value must be greater than zero.
• Current Factor (tag 91). Specifies the paydown factor for the mortgage backed security. This value must be greater than zero.
• Effective Date of Factor (tag 1109). Displays the effective date of the transaction.
• Current Face (tag 40). Displays the current face value of the security.
• Price (tag 45). Specifies the price of the security per unit. This field must be greater than zero.
• Amort Yield (tag 75). Displays the rate at which a bond accretes discount or amortizes premium. It is expressed as an annual rate.
  NOTE: Amortization, amortization yield, and interest only income are not calculated for short positions, as specified in the Long/Short Indicator field.
• Trade Yield (tag 9430). Specifies the yield calculated on the trade.
• Principal (tag 165). Displays the principal amount based on the following formula: (Current Shares * Quantity Scale ) * (Price * Price Factor)). This product is rounded to the local currency precision.
• Implied Commission Indicator (tag 78). Indicates if commission is included in the price. Options include No and Yes.
• Commission (tag 47). Specifies the amount of the trade commission.
• Tax Amount (tag 46). Specifies the tax amount on the transaction.
• Stamp Duty Tax (tag 51). Specifies the stamp duty amount on the transaction.
• Other Fee (tag 3752). Specifies any additional fees on the transaction.
• Traded Interest (tag 49). Specifies the interest accrued for the period's last coupon date, dated date, or issue date through the settlement date.
• Local Net Amount (tag 50). Displays the net amount of the trade based on the following formula: Principle + Fees.
• Settlement Currency (tag 63). Specifies the currency in which the trade is settled.
• Settlement Net Amount (tag 64). Displays the actual settled amount of the trade. The value must be greater than zero.
• Local to Base FX Rate (tag 87). Displays the foreign exchange rate used to calculate the net base amount. The value must be greater than zero.
• Base Net Amount (tag 478). Displays the base amount of the trade. This amount is calculated based on the following formula: Local Net Amount / Local to Base FX Rate. The value must be greater than zero.

Settlement Information

The following are the options for settlement information:

• Settle Trade Indicator (tag 58). Indicates whether the system settles the trade, coupon, and miscellaneous income and expenses automatically. If the entity's Auto Settle Indicator field is set to Yes, as specified on the Add/Change Entity or Master Fund Setup panels, the system will create a settlement when the trade is processed. There will be no trade to settle date gain/loss. This applies even if the settlement date is in the future. Eagle recommends that you set the Auto Settle Indicator field to No for the entity and trade panels. Options include:
  –  Yes. The system automatically settles the trade, coupon, and miscellaneous income and expenses. The system retrieves the settle date FX rate if the local currency does not equal base and generates a trade to settle date gain/loss.
  –  No. Default. The system does not automatically settle the trade, coupon, and miscellaneous income and expenses. You must schedule the settlement for these transactions using the Contract Cash panel. Or, manually settle the transactions using the Multiple Settlements panel.
• Broker Name (tag 1235). Specifies the name of the primary broker.
• Broker Code (tag 88). Specifies the code that represents the broker. The system allows you to add additional broker codes.
• Clearing Broker (tag 1236). Specifies the name of the clearing broker, if different from the trade broker.
• Clearing Broker Code (tag 1237). Specifies the code for the clearing broker.
• Custodian Bank Name (tag 1146). Specifies the name of the custodian bank responsible for the trade.
  NOTE: You must establish a relationship between the custodian bank and your entity prior to booking the trade.
• Custodian Bank Code (tag 1240). Displays the code of the custodian bank.
• Custody Bank Account Number (tag 1660). Displays the custodian bank primary account number.
• Custody Bank Subaccount (tag 1661). Displays the custodian bank subaccount number.
• Settle Instructions 1 (tag 1897). Allows you to add settlement notes.
• Settle Instructions 2 (tag 1898). Allows you to add settlement notes.
• Settle Instructions 3 (tag 1899). Allows you to add settlement notes.
• Settle Instructions 4 (tag 1900). Allows you to add settlement notes.
• Settle Location (tag 43). Specifies the location in which the trade is settled.

Other Information

The following are the options for other information:

• Transaction Notes (tag 56). Contains user defined information about the trade.
• Original Trade Ticket Number (tag 761). Contains the trade ticket identification number. The system uses it during processing. For example, IDLOT close or cancel events use this number to locate an open lot.
• Regulatory Intent (tag 8915). If you now hold the trade in an entity/accounting basis with the new International Financial Reporting Standards (IFRS) regulatory category of Fair Value Profit Loss (FVPL) but previously held the trade in an entity/accounting basis with the old regulatory category of Fair Value Option (FVO) or Held for Trading (HFT), you can identify the old regulatory category specified for the trade at the entity/accounting basis level. You can specify a value for reporting purposes only. Options include:
  –  Fair Value Option. Indicates the trade was previously held in a regulatory category of Fair Value Option, used for instruments managed on a fair value basis.
  –  Held for Trading. Indicates the trade was previously held in a regulatory category of Held for Trading, used for instruments held with the intent of selling them.
• Pending Trade Flag (tag 3695). Specifies whether the trade is eligible for pending trade processing prior to processing by the STAR accounting engine. If you use pending trade processing, the system can assign this value to incoming transactions that meet flagged position rule criteria. Or an incoming transaction can include this value. This field is hidden. Options include Y and N.
• Pending Trade Status (tag 3720). Specifies the trade's transaction status for pending trade processing prior to processing by the STAR accounting engine. If you use pending trade processing, the system can assign a value of Pending to incoming transactions that meet flagged position rule criteria. Or an incoming transaction can include a value of Pending or a custom pending transaction status value defined in the PEND_TRD_STATUS code category. The default status is Pending if no status is provided. This field is hidden.
• Holding Term (tag 9091). Specifies the holding term for the trade based on the number of days between the original acquisition date (tag 216) and the maturity date (tag 35) on the lot. If you use ledger reporting based on ledger granularity rules to break out accounts by holding term, the system uses this value to identify the holding term for trades related to bonds and preferred stocks. Eagle Accounting's core transaction processing calculates the holding term for you, but you can manually override the value displayed in this field. Eagle Insurance clients that use ledger granularity rules have the system calculate the holding term based on the schedule associated with a lot. Options include:
  –  Short Term. Identifies a short term holding. If the Holding Term Method field (tag 11479) in the trade's accounting basis has a value of 90 days, a short term holding term is 91 days to a year. If the Holding Term Method field has a value of 3 months, a short term holding term is 3 full months to a year.
  –  Cash Equivalent. Identifies a cash equivalent holding. If the Holding Term Method field (tag 11479) in the trade's accounting basis has a value of 90 days, a cash equivalent holding term is 90 days or less. If the Holding Term Method field has a value of 3 months, a cash equivalent holding term is 3 full months or less.
• User Defined Priority (tag 2862). Specifies the user generated number that determines the event sub priority. That is, after the system accounts for the event sequence and corporate action sequence.
• Order Number (tag 1092). Specifies the order number of the transaction. This can be the same for multiple lots.

Book Close Trades for Mortgage Backed Securities

To manually book a close trade for a mortgage backed security:

1. From any Eagle window, click the Eagle Navigator button to access the Eagle Navigator.
2. Enter Book Trade in the Start Search text box.
3. Click the Book Trade (Accounting Center) link to access the Book Trade tool.
   You see the Query window as the default.
4. Complete the options in the Query window and click Start Search.
5. Select the row with the security you want to trade.
6. Click Close, and click Sell or Buy to Cover.
   You see the Close MBS/ABS/IO/PO panel.
7. Complete the options on the Close MBS/ABS/IO/PO panel.
8. Click Submit.

Close MBS/ABS/IO/PO Panel Options

The following are the unique options in the Close MBS/ABS/IO/PO panel. See the Open MBS/ABS/IO/PO Panel Options section for more information about other options. Note options may vary according to your selections.

Accounting Information

The following are the unique close options for accounting information:

• Position Original Face (tag 109). Displays the original quantity of the position. The value must be greater than zero.

• Position Current Face (tag 122). Displays the current quantity of the position.

  If the value in the Current Face field is greater than the value in this field, the value in the entity's Tech Short Eligible Flag field must be set to Yes, as specified on the Add/Change Entity and Master Fund panels. If it is set to No, the trade will fail.

• Lot Selection Method (tag 27). Specifies the lot selection method the system uses to relieve (sell) lots of a security held by the entity. Options include:
  –  First In First Out (FIFO). Lots acquired first are sold first. The oldest lot is sold first based on the holding date. If you set the accounting basis Cost Basis Covered Indicator field (tag 2818) to Y, unknown cost lots are relieved first. The oldest cost lot is sold first based on the holding date.
  –  Last In First Out (LIFO). Lots acquired last are sold first. The most recent lot is sold first based on the holding date. If multiple lots share the same holding date, the lot with the greatest event sequence is relieved first. The event sequence, set internally by the system, indicates the processing order of transactions within the same position.
  –  High Amortized Cost or High Cost (HCLOT). The lots with the highest current cost are sold first. The system uses current unit cost, which includes amortization for debt securities. This method relieves the lots that can generate the maximum loss or the minimal gain.
  –  Low Amortized Cost or Low Cost (LCLOT). The lots with the lowest current cost are sold first. The system uses current unit cost, which includes amortization for debt securities. This method relieves the lots that can generate the minimal loss or the maximum gain.
  –  High Original Cost (HORIG). The lots with the highest original cost are sold first. The system uses the original unit base cost of the open lots. It relieves the lots that can generate the maximum loss or the minimal gain.
  –  Low Original Cost (LORIG). The lots with the lowest original cost are sold first. The system uses the original unit base cost of the open lots. It relieves the lots that can generate the minimal loss or the maximum gain.
  –  Identified Lot (IDLOT). The specified lot or lots are sold first, which determines cost and tax implications. You can optimize this option to specific tax situations by selecting the specific lots to be sold. If you select this method, the lower pane in the panel displays lot details for each available lot, as determined by the entity's controlling basis. If no controlling basis exists, it displays lots for the primary basis. You must specify the quantity for one or more lots that you want to relieve. The total quantity you specify for the open lots must match the quantity entered for the total close. The close trade relieves the selected lots in each of the entity's accounting bases, and keeps the lot structures in sync. The system uses the lot's Orig Event ID field (tag 457) to match a single open lot in one basis to corresponding multiple open lots in another basis, as needed. This can occur for lots fractured as a result of wash sale processing.
  –  Best Tax. The lots are selected and sold with the objective of taking losses first (short term then long term) and gains last (long term then short term). Lots are sold in the following order:
  1. Short term Losses. Lots that reflect a short term loss are sold first, beginning with lots that generate the greatest short term loss down to the least short term loss.
  2. Long term Losses. Lots that reflect a long term loss are sold, beginning with lots that generate the greatest long term loss down to the least long term loss.
  3. Short term No Gains or Losses. Short term lots that reflect no gain or loss.
  4. Long term No Gains or Losses. Long term lots that reflect no gain or loss.
  5. Long Term Gains. Lots that reflect a long term gain, beginning with lots that generate the least long term gain up to the greatest long term gain.
  6. Short Term Gains. Lots that reflect a short term gain, beginning with lots that generate the least short term gain up to the greatest short term gain.
  –  Tax Advantage (TXADV). The lots with the lowest tax liability are sold first to minimize tax liability.
  –  Versus Purchases (VSP). The lots are selected and sold based on lot purchase characteristics, such as the target purchase date and the target purchase price. This option must be specified at the trade level.
  –  Pro Rata. The lots are selected and sold based on a proportionate allocation.
  –  Tax Efficiency. The lots with the lowest tax liability are sold first to minimize tax liability. The system calculates the tax liability based on the manipulation of entity level tax factors for long and short term gains, long and short term losses, and currency gains. The system also incorporates the wash sale disallowance effect and considers the overall tax implications of closing each individual lot.
  –  Modified FIFO (MFIFO). The open lots with the same original acquisition date (tag 216) as the close transaction are sold first, starting with the lots with the lowest unit cost local. If there are no open lots with the same acquisition date as the close transaction, or all same day lots have been sold, the oldest open lots are sold first based on the acquisition date. Within a single acquisition date, the lots with the lowest unit cost local are sold first.
• Prorata Credit/Noncredit Loss Reduction (tag 16157). Indicates whether any noncredit loss associated with partial sells on the transaction is reversed prorata. This field appears only when you close less than the total outstanding quantity. Options include:
  –  Yes. Any noncredit loss associated with partial sells is reversed prorata.
  –  No. Default. Any noncredit loss associated with partial sells is reversed entirely.