15. Defining Attributes of a Securities Product

15.1 Introduction

A Security Product is a category or a type of security. For instance, you can define short term zero coupon bonds in the local currency, as a product in Oracle FLEXCUBE. Similarly, you can define Rights as a product. A security product, thus, serves to classify the securities that you deal in.

In this chapter, we shall discuss the manner in which you can define attributes specific to a Securities (SP) product.

You can create a securities product in the SP Product Definition screen, invoked from the Application Browser. In this screen, you can enter basic information relating to a SP product such as the Product Code, the Description, etc.

You can invoke the ‘Securities Security Product Definition’ screen by typing ‘SEDSEPRD’ in the field at the top right corner of the Application tool bar and clicking on the adjoining arrow button.

For any product you create in Oracle FLEXCUBE, you can define generic attributes, such as branch, currency, and customer restrictions, interest details, tax details, etc., by clicking on the appropriate icon in the horizontal array of icons in this screen. For a Portfolio product, in addition to these generic attributes, you can specifically define other attributes. These attributes are discussed in detail in this chapter.

You can define the attributes specific to a Portfolio product in the SP Product Definition Main screen and the SP Product Preferences screen. In these screens, you can specify the product type and set the product preferences respectively.

For further information on the generic attributes that you can define for a product, refer the following Oracle FLEXCUBE User Manuals:

This section contains the following topics:

15.2 Product Type

The product type identifies the basic nature of a product. A securities product that you create, can belong to any one of the following types:

15.2.1 Exchange Rate Variance

You can define the market price variance that you would like to allow for a security product. This variance is expressed in terms of a percentage.

For a special customer or in special cases, you may want to use an exchange rate (a special rate) that is greater than the exchange rate maintained for a currency pair. The variance is referred to as the Exchange Rate Variance.

When creating a product, you can express an Exchange Rate Variance Limit in terms of a percentage. This variance limit would apply to all portfolios associated with the portfolio product.

The Override Limit

If the variance between the default rate and the rate input varies by a percentage that is between the Override Limit and the Rate Stop Limit, you can save the transaction (involving the portfolio) by providing an override.

Stop Limit

If the variance between the default rate and the rate input varies by a percentage greater than or equal to the Rate Stop Limit, you cannot save the transaction involving the portfolio.

15.3 Preferences for a Product

15.3.1 Specifying Preferences for a Product

Preferences are the options that are available for defining the attributes of a product. The preferences that you define for a product will be inherited by all securities that are associated with the product.

Click ‘Preferences’ button to invoke the ‘Preferences’ screen. Through this screen, you can define preferences for the product you are creating.

When defining a product, you can choose to specify preferences for the product by the following methods:

If you would like to associate a Security Preference Class to a product, choose ‘Default from Class’ button from the Security Product Preferences screen. A list of the Security Preference Classes that you have maintained will be displayed. Choose the preference class that is applicable to the product that you are creating.

Click ‘Floating Rate Fixing’ button to display Floating Rate Fixing Parameter screen.

For detailed information on this screen refer to the section, ‘Specifying the Interest Rate Revision Frequency’ in the chapter, ‘Defining Security Preference classes’ of this User Manual.

Click ‘Limits’ button to display Currency Wise Limits screen.

For detailed information on this screen, refer to the section ‘Defining deal limits for a preference class’ in the chapter, ‘Defining Security Preference classes’ of this User Manual.

For detailed information on each of the attributes please refer to the chapter called Defining Security Preference classes.

15.4 Coupon Processing

Coupon Plotting

You can specify whether coupon events that fall on holidays should be shifted forward or backward. You can also choose not to change the event date even if it is a holiday.

In the Coupon Plotting Holiday Treatment field, you can select from the following options:

The choice that you make here defaults to the specific securities that you define under this product.

Irrespective of the holiday treatment specified by you, the system will not perform any holiday adjustment if, in the Product Event Accounting Entries Maintenance, you select ‘No’ as the Holiday Treatment parameter. A more detailed explanation is available in the Products manual.

If the forward/backward shift in a coupon event date entails a movement across months, then the event date will be guided by whether you have allowed / disallowed movement across months in the Branch Parameters screen.

For more details and an example, refer to the chapter on Bank and Branch Parameter Maintenance in this manual.

Accounting Value Date

Interest calculations and accruals are done till the coupon event date. However, if the coupon event date is a holiday, you can specify whether the actual processing of accounting entries should be shifted forward / backward. You can also choose that the accounting entries shall be passed as of the coupon processing date itself, even though it is a holiday.

In the Acct Val Dt Holiday Treatment screen, you can select from the following options:

The choice that you make here defaults to the specific securities that you define under this product.

If the forward/backward shift in an accounting value date entails a movement across months, then the value date will be guided by whether you have allowed/ disallowed movement across months in the Branch Parameters screen.

A coupon event date falling on a holiday may itself be shifted to the previous or following working day. In that case, holiday treatment for the accounting value date becomes irrelevant.

For more details and an example, refer to the chapter on Bank and Branch Parameter Maintenance in this manual.

Coupon Date Amendment Limit

For continuous coupon schedules, the coupon payment dates are automatically populated according to the coupon frequency that you specify while defining a security. You can amend these dates within the limit that you specify in the Coupon Date Amendment Limit field.

For more details on changing coupon dates for continuous schedules, refer to the Securities Online chapter in this manual.

15.5 Capturing Interest Details

Click ‘Interest’ button and invoke the following screen.

This section contains the following topics:

15.5.1 Specifying Interest Type Details

While building an Interest Component, you can define

15.5.2 Specifying Event Details

Events and the Basis Amount

The term Event can be explained with reference to a deal. A deal goes through different stages in its life cycle, such as:

Each stage is referred to as an Event in Oracle FLEXCUBE.

The event at which you would like to associate the interest component, being defined, to a contract is referred to as the Association Event.

The basis on which an interest is calculated is referred to as the Basis Amount. For instance, a coupon can be on the basis of the current face value of a security. When building an interest class, you have to specify the tag associated with the Basis Amount.

Accrual Required

You can choose to accrue the interests due on a contract. To accrue the interest payable on a contract, choose the ‘Accrual Required’ option.

Rate Type

The interests paid on contracts can be at a Fixed Rate, or on the basis of a Floating Rate. If you indicate that interests should be calculated on the basis of a Floating Rate, you must specify the ‘Periodic’ Floating Rate Type.

For all contracts maintained under products, associated with a class, the interest will be by default calculated using the specified Rate type.

15.5.2.1 Specifying Rate Details

Default Rate Code

Interest payable on contracts would be calculated at specific rates. When building an interest component, you have to specify the rate at which the interest should be computed. When associating a rate code (that you have maintained in the Rate Codes Maintenance screen) with the interest component that you are building, the rates corresponding to the code will be used to compute interest.

When maintaining a contract, you can choose to waive the rate code altogether or amend the properties of the code to suit the security.

If you allow amendment of a rate code, you can specify if you would like to allow rate code amendment after the association event.

You can also allow the amendment of the rate value (corresponding to a rate code).

Default Tenor

Each rate code is associated with a tenor. For instance you have a Rate Code ‘LIBOR’. You can link any number of tenor codes to the same rate code.

Tenor Code Description
1W One week rate
2W Two week rate
2M Two months rate
6M Six months rate
1Y One year rate

When building an interest component, you can specify a Tenor Code that you would like to associate, with the Floating Interest Rate Code. Interests for contracts (maintained under a product) will be calculated using the rate corresponding to the Rate Code and the Tenor Code.