4. General Maintenance

4.1 Introduction

Before beginning operations on the Securities module, you need to maintain certain basic information. The informa­tion that needs to be maintained includes:

•Bank and Branch parameter details

•Floating interest rate details

•Market definition details

•Safe Keeping location details

•Tax details

The procedure for maintaining these details is discussed in the following sections.

note: The basic information necessary for the successful operation of the securities module must be periodi­cally reviewed and updated to reflect the latest changes.

4.2 Bank Parameters

This topic contains the following sub-topics:

1)Maintain Bank Parameters

2)Maintain Deal Product

3)Maintain Nominal Based Yield Computation

4.2.1 Maintain Bank Parameters

This topic describes the systematic procedure to maintain bank parameters:

Context:   

In the Securities Bank Parameters screen, you can maintain certain basic information regarding the processing of Auto Deals.

1.On Homepage, specify SEDXBNPM in the text box, and click next arrow.

Step Result:   Securities Bank Parameter Maintenance screen is displayed.

Figure 4.1: Securities Bank Parameters Maintenance

2.On Securities Bank Parameter Maintenance screen, specify the fields.

For more information about the fields, refer to 4.2.2 Maintain Deal Product.

If you are calling a record that has already been created, click on the Summary view. From the Summary screen, you can open an existing record. Highlight the record you wish to view and double click on it. The details of the bank parameter record will be displayed in a tabular form.

Table 4.1: Securities Bank Parameter Maintenance

3.On the Securities Bank Parameter Maintenance screen, click Warrants and Redemption.

Step Result:   Securities Bank Parameter Maintenance - with Warrants and Redemption screen is displayed.

Figure 4.2: Securities Bank Parameter Maintenance

4.On the Warrants & Redemption tab screen, specify the details as required.

For information on fields, see the below table

Table 4.2: Warrants & Redemption- Field Description

4.2.2 Maintain Deal Product

Specifying Banker’s Acceptance for a Placement/Loan Product

If you wish to process Banker’s Acceptances in your bank, then you must indicate the Loan/ MM product, under which loan contracts or money market placements are to be created whenever you process a Banker’s Acceptance deal. In a Banker’s Acceptance deal, you fund the issuer of security by creating a loan or a money market placement.

Select from the list of values containing all open and authorized Loan / MM products, which satisfy the following conditions:

•In case of an LD product, the product type must be - Loans

•In case of an MM product, the type must be - Placement

•The rate type must be - Special

•The payment type must be - Discounted

•The Loan / MM product can have only one interest component attached.

Refer to the Deal Online chapter of this User Manual for details on processing Banker’s Acceptances.

4.2.3 Maintain Nominal Based Yield Computation

For your bank, you can specify whether the yield computation for securities must be based on Nominal Cash Flows or Face value (per unit). You can maintain this parameter in the CSTB_PARAM (Bank-Level Parameters) table. Maintain the parameter COMMON_YLD_ACCR as ‘Y’.

Once this parameter is maintained as Y, the system will compute the yield and NPV for Bonds and T Bills using Nominal based cash flows.

Subsequently, the system triggers the Yield accrual event YACR. The value passed for the event YACR is inclusive of the discount/premium accrual for the deal and the events ACRD and ACRP will not be passed separately.

To compute yield using nominal based cash flows, the following validations are performed in the system:

•Coupon Rate Revision – If you have specified the bank parameter ‘COMMON_YLD_ACCR’ as ‘Y’, then

•The system does not allow a coupon rate revision before an existing IRR effective date. The IRR record can be a result of a sell deal or an earlier coupon rate change.

•If the revision date is less than the application date, the coupon rate revision is populated with the future revision details on confirmation of the coupon rate revision.

•Buy Deal – In case the Security is a Bond, and you have specified the bank parameter ‘COMMON_YLD_ACCR’ as ‘Y’ then

•Buy Deal – In case the Security is a Bond, and you have specified the bank parameter ‘COMMON_YLD_­ACCR’ as ‘Y’ then

•Yield is computed based on actual cash flows instead of the face value.

•Securities Batch:

•Coupon rate revision – during EOD processing, the IRVN process initiates the coupon rate revision activity on the effective date of coupon rate revision. This is triggered before the YTMCALC – YTM Recalculation and ALPL processes. The system triggers the IRR re-computation before ALPL (profit/loss realization) processing. As a result of the revision, the ‘CRVN’ event for the deal is passed based on the new coupon rate

•Sell Deal – the system triggers an IRR effective on the sale date during the processing of a sell deal. In this case, the Yield value does not change but the cash flows are recomputed based on the current outstanding amount. Yield is recomputed only if the selling dealer is backdated and a rate change has happened after the DSTL date of the sale deal. The system throws up an override is a backdated sell or buy deal is input for a security for which rate revision has already occurred.

•Reversal of Sell Deal – in case of reversal of a sell deal, the IRR record as of the DSTL date of the sale deal is deleted and a new IRR record is created as of the earliest IRR re-computation date. The re-computed date can be the date of the coupon rate revision date or the DSTL date of the re-computed sell deal.

4.3 Branch Parameters

This topic contains the following sub-topic:

1)Define Branch Parameters

4.3.1 Define Branch Parameters

This topic describes the systematic instruction to define branch parameters.

Context:   

A set of rules that governs the processing of securities in a particular branch of your bank is defined in the Branch Parameters screen.

Prerequisite:   

Specify User Id and Password, and login to Homepage.

1.On Homepage, specify SEDXBRPM in the text box, and click the next arrow.

Step Result:   Securities Branch Parameters screen is displayed.

Figure 4.3: Securities Branch Parameters

2.On Securities Branch Parameters screen and click Exit.

For more information on fields, refer to the Table 4.3: Securities Branch Parameters - Field Description

The events, for which you had indicated automatic processing, are triggered off during the Batch Process. You can specify preferences for the automatic events that fall on a holiday, in the Branch Parameters screen.

Table 4.3: Securities Branch Parameters - Field Description

Table 4.4: For the Events SPLP & SPSP

Table 4.5: For the Events SSLP & SSSP

Table 4.6: For the Event IACR

At the end of the coupon liquidation event, CPLQ, the balance in the interest receivable head (iccf­comp01_RCPY) would be zero. The following example will illustrate this.

The following deal details are available:

•Coupon Period – 1st January 2003 to 30-Jan-2003

•Previous Coupon Date (PCD) – 1st January 2003

•Next Coupon Date (NCD) – 30th January 2003

•Ex Date – 26th January 2000 (the issuer will pay interest to the holders of the securities as on the Ex. Date or the Record Date).

•Interest amount – 1$per day per unit

•Accrual Frequency – Daily

Now on 10th Jan, you buy 20 units of a bond S1 at PUCM amt of 200$i.e. the interest accrued for the period 1st Jan (PCD) to 10th Jan will be tracked as a receivable from the issuer of the units (200 $= 20 * 1*10)

The following entries would be passed as part of event SPLP (amount tag IntComp_PUCM):

Table 4.7: SPLP entries

Interest accrued on EOD of 26th Jan (for the period from 11th Jan to 26th Jan) = 320 USD (16

days * 20 units * 1 USD).

The following entries will be passed for this amount as part of event IACR (amount tag

IntComp_IA):

Table 4.8: IACR entries

On 27th Jan, you decide to sell 15 units at the SOEX amount of 60 $. This is the sold interest after the Ex. Date/Record Date i.e. the interest on 15 units for the period from 27th Jan to 30th Jan. The following entries will be passed for this amount as part of event SSLP (amount tag IntComp_SOEX):

Table 4.9: SEOEX entries

Interest accrued on the remaining 5 units for the same period i.e. from 27th Jan to 30 Jan =

20 USD (5 units * 1 USD * 4 days)

Therefore, Interest accrued on EOD of 30th Jan = 320 + 20 = 340 USD

Table 4.10: Entries

Table 4.11: 600 USD table

4.4 Floating rate Codes

This topic contains the following sub-topic:

1)Define Floating Rate Codes

4.4.1 Define Floating Rate Codes

This topic describes the systematic procedure to define floating rate interest codes.

Prerequisite:   

Specify User Id and Password, and login to Homescreen.

1.On Homescreen, specify CFDRTCD in the text box, and click next arrow.

Step Result:   Rate Code Maintenance screen is displayed.

Figure 4.4: Rate Code Maintenance

2.On Rate Code Maintenance screen, specify the fields.

For more information on fields, refer to Table 4.12: Rate Code Maintenance - Field Description

Table 4.12: Rate Code Maintenance - Field Description

In order to process MT340, MT360 and MT361 you need to maintain the following rate codes:

–AONIA

–BR-AUBBSW

–BBR-BBSW

–SWAPRATE

–BA-CDOR

–BA

–CORRA

–TBILL

–ISDAFIX

–CLICP

–CIBOR

–DKKOIS

–ANNSR

–ANNUALSR

–EONIA

–EURIBOR

–TEC10-CNO

–HIBOR

–HONIX

–ISDA

–IDMA

–IDREFIX

–SBI

–SOR

–TELBOR01

–TELBOR

–BMK

–CMT

–INBMK

–MIBOR

–MIFOR

–MIOIS

–MITOR

–RFRCBANKS

–BBSF

–LIBOR

–MUTANCALL

–TIBOR

–TONA

–TSR

–CD3220

–CD-KSDA

–TILE-BANXICO

–NIBOR-NIBR

–BBR

–NZIONA

–WIBOR

–ANNUAL

–STIBOR

–SIBOR

–SONAR

–SOR

–THBFIX

–CMS

–COF11

–FEDFUND

–FEDFUND

–ISDAFIX3

–SANDPINDEX

–SIFMA

–TREASURYRATE

–TRSYRATE

–TRSYRATE

–BBR

–BA

–BA

–TBILL

–LIBOR

–TSR

–BBR

–WIBOR

–SIBOR

–SOR

–BRIBOR

–SOR

–BRIBOR

–SOR

–CMS

–COF11

–ISDA

–LIBOR

–TIBOR

4.5 Define Rate Sources

This topic describes the systematic instructions to define rate sources.

Prerequisite:   

Specify User ID and Password, and login to Homescreen.

1.On Homescreen, specify CFDRTSRC in the text box and click next arrow.

Step Result:   Rate Source Definition screen is displayed.

Figure 4.5: Rate Source Definition

2.On Rate Source Definition screen, specify the fields.

 For more information on fields, refer Rate type Definition - Field Description.

Table 4.13: Rate type Definition - Field Description

4.6 Define Rate Type

This topic describes about the systematic instructions to define rate type.

Prerequisite:   

Specify User ID and Password, and login to Homescreen.

1.On Homescreen, specify CFDRTTYP in the text box, and click next arrow.

Step Result:   Define Rate screen is displayed.

Figure 4.6: Rate Type Definition

2.On rate Type Definition specify the fields.

Table 4.14: Rate Type Definition

4.7 Define Float Rates

This topic describes the systematic procedure to define float rates.

Prerequisite:   

Specify User ID and Password, and login to Homescreen.

1.On Homescreen, specify CFDFLRAT in the text box and click next arrow.

Step Result:   Floating Rate Maintenance screen is displayed.

Figure 4.7: Floating Rate Maintenance

2.On Floating Rate Maintenance screen, specify the fields.

For more information about the fields, refer to Table 4.15: Floating Rate Maintenance.

Table 4.15: Floating Rate Maintenance

4.8 Rate Fixing Maintenance

This topic provides the instructions to capture the Treasury Rate Fixing Maintenance details.

For every cash flow settlement period of the floating rate leg, you have to fix the floating rate. The rate fixing days defined may differ from trade to trade basis. The floating rate fixed in advance or at the end of the period according to the rate fixing days and movement set for the trade.

For more information on Rate fixing Maintenance, refer to the Interest User manual, Section 2.4 Treasury Rate Fixing Maintenance.

4.9 Interest Class Definition

Treasury Interest Class Definition supports RFR methods and computation preferences for securities repo module only.

For more information on Interest Class Definition, refer to the Class User manual, Section 2.2.1 Defining Interest Class

4.10 Market Details

This topic describes the following sub-topic

1)Maintain Market Details

4.11 Maintain Market Details

This topic describes the systematic instruction to maintain market details.

Context:   

It is necessary to maintain certain standard details, relating to the markets where securities are traded. The infor­mation relates to issues such as the interest calculation method, the relevant spot, ex-dates, and the default safe­keeping location.

Only the Head Office of your bank can define, and maintain market place related details. The other branches of your bank can refer to these details, every time a security is processed.

The advantage of defining market place details is that at the time of defining security, you only need to specify the code assigned to the market. All the details maintained for the particular market is automatically picked up.

Prerequisite:   

Specify User ID and Password, and login to the Homescreen.

1.On Homescreen, type SEDXMTCD in the text box, and click next arrow.

If you are maintaining details of a new market place, choose New from the Actions menu or click on a new icon to open the Definition detailed screen.

If you are calling a market place maintenance record that has already been defined, choose the Summary option under Market Codes. From the Summary, screen double clicks a record of your choice to open it.

Step Result:   Market Definition screen is displayed.

Figure 4.8: Market Definition screen

2.On Market Definition details tab, specify the fields.

For more information on fields, refer to Table 4.16: Market Definition - Field Description

Before maintaining, the interest calculation method, and the relevant spot and ex dates, etc., certain basic details about the market place need to be maintained.

Apart from the other main details, you can specify the Yield Calculation Parameters for Bonds and T-bills for each market definition record that you maintain.

Table 4.16: Market Definition - Field Description

3.On Market Definition screen, click Interest

Step Result:   Market Definition Interest screen is displayed.

4.On Market Definition screen, specify the fields.

For more information on fields, refer to

The interest details that you define here will be picked up, and defaulted, in the interest section of the Secu­rities Definition screen. However, while defining security details you have the option of changing these details.

The details maintained here are specific to the interest calculation methods, applied during accruals and liqui­dation. It is not necessary to specify, the same day count method for calculating interest on accruals as well as on liquidation. The system allows specifying two different day count methods for calculating interest, one for accruals and the other for liquidation.

5.On Market Definition screen, click Spot Date.

Step Result:   Spot Date tab is displayed.

Figure 4.9: Spot Date Tab

6.On Spot Date tab, specify the details.

In this section, indicate the method by which Spot Date is calculated. Spot date is calculated to keep a track of deal settlements. You can click on the respective tab to go to this section of the screen.

There are two methods for calculating the spot-date. It can be calculated as a certain number of days from the trade date of the security. It can also be fixed for a market place for a specific range of trade dates.

There are two methods for calculating the spot-date. It can be calculated as a certain number of days from the trade date of the security. It can also be fixed for a market place for a specific range of trade dates.

Table 4.17: Spot Date - Field Description

7.On Market Definition Screen, click Ex Date

Step Result:   Market Definition Ex-Date tab is displayed.

8.On Ex Date tab, specify the fields.

There are different methods for calculating the ex date. It can be calculated as a certain number of ex days, prior to the next coupon date of the security or it can be fixed for a market place for a specific period.

Table 4.18: Ex Date - Field Description

4.12 Maintain Settlement Parties

This topic describes about the systematic instructions to maintain deal settlement parties.

Prerequisite:   

Specify User ID and Password, and login to Homescreen.

1.On Homescreen, specify SEDSPRTY in the text box, and click next arrow.

Step Result:   Maintain Settlement Parties screen is displayed.

Figure 4.10: Settlement Parties Maintenance

2.On Settlement Parties Maintenance specify the fields.

For more information on the fields, refer Table 4.19: Settlement Parties Maintenance - Field Description

Table 4.19: Settlement Parties Maintenance - Field Description

During creation of Security deal, the system defaults the values from ‘Deal Settlement Parties Maintenance’ in the ‘Parties’ tab of Securities Deal Input screen from the Parties maintenance done for the combination of counterparty and Market code.

The party details are defaulted to the Bank leg of the Deal (i.e. BB or BS).

–BB – SELL, DEAG, PSET

–BS –BUYR, REAG, PSET

The system gets the BIC or address for the counterparty from customer leg and sets the BUYR or SELL record.

3.The settlement party maintenance are defaulted in Parties tab for the Bank Leg. You can capture the values if there is no maintenance available.

4.You can amend the defaulted settlement parties maintenance in Parties tab before authorization of the Secu­rity Deal.

5.The system performs the following validations in this screen:

–On selection of the Party ID for Party type ‘DEAG’, the system defaults the BIC code of the Party ID or Address Line 1 to Address Line 4 if the BIC is not maintained for the Party ID (coun­terparty).

–You cannot edit the fields Address Line 1 to Address Line 4 from ‘Party Details’ grid if any one value is set from BIC or CIF.

–The system allows you to modify the fields Address Line 1 to Address Line 4 from ‘Party Details’ grid if Party ID is not selected. The value specified for Address Line 1 should satisfy BIC code validation.

–The system validates when neither Party ID nor Address Line 1 field is specified on save of the record.

4.13 Cancellation Message

OBTR generates MT540, MT541, MT542 and MT543 as a part of reversal event of below type of deals.

•Security buy deal

•Security sell deal

•Repo deal

•Reverse-repo deal

You can link the message ‘SEC_SETTLEMENT’ with ‘REVR’ (Reversal) and ‘CANC’ in Bank Buy/ Sell Deal Product, Repo and Reverse repo product and ‘CANC’ (Cancellation) event in Bank Buy/ Sell Deal Product.

The Block deal generates the message MT543 MT542 which has the Repo/Reverse Repo Rates. The SEC_MES­SAGE is to be linked with BOOK event of Block product.

The negative rates given in SR Repo/Reverse Repo contract are reflected in the Block deal message. OBTR resolves message type that has to be triggered based on deal product type and resulting in one of the SWIFT messages during reversal event.

4.14 Rate Reset Confirmation

   The system generates the MT543 and MT541 messages during rate revision (REVN) event of float rate Repo and Reverse repo deals.

It generates ‘Cancellation’ (CANC) and New ‘NEWM’ messages during rate revision authorization process. CANC carries deal information of blocked instrument of Repo/ Reverse-Repo deal.

‘New’ indicates the latest float rate value.

4.15 EIM for Treasury Bills and Security Bonds

Oracle Banking Treasury Management also supports yield computation using nominal based cash flows. This is applicable for bonds and treasury bills for both WAC and non-WAC based portfolio cash

flows.

4.16 Processing for Bonds

If the parameter ‘COMMON_YLD_ACCR’ is set to ‘Y’, the initial cash flow for yield computation will be based on the net considerations of the deal. Yield will be calculated based on the actual cash flows instead of the face value. The formula used for the computation of YTM for Bonds is the same.

Table 4.20: Notation

4.17 Processing for Treasury Bills

The YTM is computed using O/S Deal Nominal if COMMON_YLD_ACCR is set to Y. During the Revaluation of T-Bills and Accrual of Discount for T-Bills, the O/S Deal Nominal is also used to compute the Net Present Value (NPV). The formula used for the computation of YTM for T-Bills is the same.

Table 4.21: Notation

note: If the parameter COMMON_YLD_ACCR is set to Y, discount accrual is calculated at nominal value, and no scale-up would be done during the discount accrual process. This applies to both, T Bills and Bonds.

4.18 Day Count Method Numerator

Indicate the day count numerator, which is to be used to arrive at the number of days for yield calculation. The options available are:

•30 Euro

•30 US

•Actual

4.19 Yield Calculation Parameters for T-Bills

The options available for calculating the Numerator are:

•30 Euro

•30 US

•Actual

The options available for calculating the Denominator are:

•360

•365

•364

You can select the appropriate.

note: For each Security, the Yield Calculation Parameters are defaulted from the market of issue depending on whether it is a Bond or a T-Bill. You will be allowed to modify these details.

Consider the following example for 364 Days Interest Method:

Forgiven bond security (SEC364M2), schedules are generated as shown below:

Security Instrument: SEC364M2

Quantity: 100

Security Face Value: 100

Interest Rate: 2%

Denom Method: Actual/364

Deal Value Date: 2-Sep-2008

Deal Maturity: 23-Nov-2008

Coupon Schedule: Weekly

Table 4.22: Details

Consider the following example for Yield (T-Bills/Bonds)

Security Instrument: SEC364M2

Deal Input Price: 100

Redemption Price: 120

Denom Method: 364

DSTL Date: 2-Sep-2008

Deal Maturity: 23-Nov-2008

Formula used for Yield Calculation:

Discounted:

Yield = ((Redemption Value – Input Price) /(Redemption Value)) * (Denom Method/ No of

days);

True discount (Return):

Yield = ((Redemption Value – Input Price) /(Input Price)) * (Denom Method/ No of days);

Days between DSTL and Maturity Date = 81

For Discounted:

Yield = ((120-100)/120)*(364/81) = 0.748971193415638

True discount (Return):

Yield = ((120-100)/100)*(364/81) = 0.898765432098765

4.20 Premium/Discount for Current Interest Period

Check this option to specify that the premium or discount should be accrued only for the current period. This option will be applicable only if the security is a Floating Rate Bond. If you check this option, all the securities whose market code is identical to the one specified in the Market Definition screen will inherit this feature, provided the interest rate type of the specified security product is Floating.

4.21 Compute Coupon Interest

This topic describes the following sub-topics:

4.21.1 Interest Method for Computing Coupon Interest

Apart from the above-mentioned method for calculating the interest, you can also use the ACT/ACT–ISMA Interest Method and ACT/ACT–FRF Interest Method.

ACT/ACT–ISMA Interest Method

The ACT/ACT–FRF Interest Method is applied for periodic coupons using the following coupon:

Coupon Interest = Nominal x (Coupon Rate/Number of Coupons) x (Number of elapsed Days/ Number of days in coupon period)

For ACT/ACT–ISMA, you need to maintain the following parameters:

•Numerator Method – Any of the option in the list

•Denominator Method – Actual

•Denominator Basis – Per Annum

•Rate Denomination Basis – Per Coupon Period

Let us understand the above with the following example:

Consider the following facts:

Security purchased for 10 million at a rate of 5% p.a with the coupon date of 15th Jan.

In case the frequency of the coupon is Yearly:

The ACT/ACT–ISMA method for a non leap year is

Amount x 5/100 x 365/365 x 1

And for a leap year the ACT/ACT–ISMA method is

Amount x 5/100 x 366/366 x 1

In case the frequency of the coupon is Half yearly:

Then, for a coupon on 15/01 the formula used in ACT/ACT–ISMA method is

Amount x 5/100 x 184/184 x 2

And for coupon on 15/07, the formula used in this method is

For a non leap year:

Amount x 5/100 x 181/181 x 2

For a leap year the formula is:

Amount x 5/100 x 182/182 x 2

In case the frequency of the coupon is Quarterly:

Then, for coupon on 15/01 the formula used in ACT/ACT–ISMA method is

Amount x 5/100 x 92/92 x 4

For coupon on 15/07, the formula used in this method is

For a non leap year:

Amount x 5/100 x 90/90 x 4

For a leap year the formula is:

•Amount x 5/100 x 91/91 x 4

•For coupon on 15/10, the formula used in this method is Amount x 5/100 x 92/92 x 4

366 Basis

specify whether the system should use a leap year or leap date for calculating the interest

•Leap Year (Y) – Indicates that the system will compute the interest based on the number of calendar days in the year.

•Leap Date (D) – Indicates that the system will use the ACT/ACT–FRF Interest Method to compute the interest. Specify whether the system should use a leap year or leap date for calculating the interest

note: This field is enabled only if the Denominator Basis value is Per Annum, and the Denominator Method is ACTUAL.

ACT/ACT–FRF Interest Method

In ACT/ACT–FRF Interest Method, the Numerator will be the actual number of days between two coupon dates and the denominator will be 366 under the following cases:

•If 29th February falls between the duration of two coupon dates (i.e. previous coupon date and next coupon date)

•If the previous coupon date and the next coupon date fall in different years (annual frequency, next coupon dates in the immediately subsequent year of previous coupon date)

•If the coupon schedule is not periodic and spreads across multiple years. The system will apply 366 as the denominator for all the years for computing the day count, even if one instance of 29th February falls in between the coupon dates.

Let us understand the formula applied for calculating the interest in ACT/ACT–FRF method

with an example:

Consider the following facts:

A security purchased for 10 million at a rate of 5% p.a with the coupon date of 15th January.

Case 1:

Assume the following parameters are maintained for a yearly coupon:

•Nominal - 10,000,000

•Interest Rate – 5% per Annum

•Coupon Frequency – Annual

•Previous Coupon Date – 15/01/1999

•Next Coupon Date – 15/01/2000

•Numerator Method – ACTUAL

•Denominator Method – ACTUAL

•Denominator Basis – Per Annum

In case 366 basis is Leap Year:

The interest is calculated based on the day count derived for each of the two years in which the coupon date fall and the formula applied is:

10,000,000 x 5/100 x 350/365 + 10,000,000 x 5/100 x 15/366

In case 366 basis is Leap Date:

Here the system will apply the ACT/ACT–FRF interest method to compute the coupon interest. Since this period does not include 29th February, the denominator for interest calculation will be 365 and the formula will be:

10,000,000 x 5/100 x 365/365

Assume the following parameters are maintained for a half yearly coupon:

•Nominal - 10,000,000

•Interest Rate – 5% per Annum

•Coupon Frequency – Half yearly

•Ÿn Previous Coupon Date ­V 15/01/2000 (PCD 15/07/1999)

•Next Coupon Date – 15/07/2000 (PCD 15/01/2000)

•Numerator Method – ACTUAL

•Denominator Method – ACTUAL

•Denominator Basis – Per Annum

In case 366 basis is Leap Year:

The interest is calculated based on the day count, derived for each of the two years in which the coupon dates fall (if the previous and the next coupon dates fall in different years). If both coupon dates fall in the same year, the denominator will be 365 or 366 respectively, depending on whether the current year is a leap year or a non-leap year.

For coupon on 15/01/2000, the formula used is

10,000,000 x 5/100 x 169/ 365 + 10,000,000 x 5/100 x 15/366

And for coupon on 15/07/2000, the formula used in this method is

10,000,000 x 5/100 x 182/366

In case 366 basis is Leap Date:

For coupon on 15/01/2000, the formula used in ACT/ACT– FRF method is

10,000,000 x 5/100 x 184/ 365

This period does not include 29th February.

And for coupon on 15/07/2000, the formula used in ACT/ACT– FRF method is

10,000,000 x 5/100 x 182/366

29th February falls in this period.

Case 2:

Assume the following parameters are maintained for a Quarterly coupon:

•Nominal - 10,000,000

•Interest Rate ­V 5% per Annum

•Coupon Frequency ­V Quarterly

•Coupon Date 1­V 15/01/2000 (PCD 15/10/1999)

•Coupon Date 2­V 15/04/2000 (PCD 15/01/2000)

•Coupon Date 3­V 15/07/2000 (PCD 15/04/2000)

•Coupon Date 4­V 15/10/2000 (PCD 15/07/2000)

•Numerator Method ­V ACTUAL

•Denominator Method ­V ACTUAL

•Denominator Basis ­V Per Annum

In case 366 basis is Leap Year:

The interest is calculated based on the day count derived for each of the two years in which the coupon dates fall (if the previous and next coupon dates fall in different years). If both coupon dates fall in the same year, the denom­inator will be 365 or 366 respectively depending on whether the current year is a leap year or non-leap year.

For coupon on 15/01/2000 the formula used in is

10,000,000 x 5/100 x 77/ 365 + 10,000,000 x 5/100 x 15/366

For coupon on 15/04/2000, the formula applied is

10,000,000 x 5/100 x 91/366

For coupon on 15/07/2000, the formula applied is

10,000,000 x 5/100 x 91/366

For coupon on 15/10/2000, the formula applied is

10,000,000 x 5/100 x 92/366

In case 366 basis is Leap Date:

For coupon on 15/01/2000, the formula used in ACT/ACT– FRF method is

10,000,000 x 5/100 x 92/ 365

This period does not include 29th February.

For coupon on 15/04/2000, the formula used in this method is

10,000,000 x 5/100 x 91/365

29th February falls in this period.

For coupon on 15/07/2000, the formula used in this method is

10,000,000 x 5/100 x 91/365

This period does not include 29th February.

For coupon on 15/10/2000, the formula used in this method is

10,000,000 x 5/100 x 92/365

This period does not include 29th February.

4.21.2 Exempt Interest for the Ex Period

For Purchase Deals and Sell Deals booked in the Ex Period, you can specify whether you want to calculate the interest for that period. If you check this box, the system will not apply interest for such deals. Also, the system accrues the holdings as of the ex-date, and will not pass any interest related accounting entries related to the deals booked in the Ex period. In case you do not opt for a zero-interest facility, the system accrues the actual holdings during the accrual period, including the buy/sell deals booked in the Ex period.

Consider the following example.

Let us consider a security with:

Coupon Start Date – 01 Aug

Next Coupon Date – 08 Aug

Record Date –05 Aug

Coupon Interest – 3.65% (Per Annum)

Interest Accrual Frequency – Daily

Now let us assume that on 06 Aug 5000 Units are sold -

Case 1: If you do not opt for Zero interest

Accounting entries are passed for event SSLP (Interest Only)

Dr IntComp_RCPY- 100 (IntComp_SOEX)

Dr Sec Bridge GL - 100 (IntComp_SOEX)

Case 2: If you opt for Zero interest

For interest, the system does not pass any accounting entries

4.22 Tax Details

This topic contains the following sub-topics:

1)Specify Tax Details

2)Associate Scheme with Issuer Tax

4.22.1 Specify Tax Details

With every market place that you define, you can associate a Tax scheme. When you specify the market code, at the time of defining security, the details of the tax scheme associated with the market code are automatically asso­ciated with the security.

note: At the market definition level, you can only maintain the Issuer tax details. You can, however, change these details at the security definition level.

To invoke this screen, click the Tax button in the Market Definition screen. The Tax Definition screen will be displayed.

4.22.2 Associate Scheme with Issuer Tax

To associate a tax scheme with an issuer class, click the Default From Class’ button. The Default from the Class screen will be displayed. In it is available a list of tax classes specific to the Securities module. Select the tax scheme to be associated with the issuer tax. All the components linked to the particular scheme will be associated with the market code you are defining. To change the tax scheme which has already been linked to a market code, in the Market Definition screen, click on the unlock button in the toolbar.

4.22.3 Indicate Stop Association

The tax components linked to a tax scheme will be automatically applied to all deals involving the security associated with the particular market code. However, if you want to stop applying

one or more of these components to new contracts that are initiated, you can do so by checking the Stop Association field. Stopping the application, of a tax component for a market code would be equivalent to deleting the component for all deals involving the security. However, you have the option of using the definition made for the component, once again. To do so, Uncheck this field. Deals that are subsequently input, will pick up the components.

note: Entry to certain fields in the Market Definition screen is mandatory. If you try to save the record without inputs to all these fields, the record will not be saved. You will be prompted to give all the mandatory inputs before attempting to save it again.

4.23 List of Glossary - General Maintenance

SEDXBNPM

Securities Bank Parameters Maintenance - 4.2.1 Maintain Bank Parameters (p. 30)

SEDXBRPM

Securities Branch Parameters - 4.3.1 Define Branch Parameters (p. 35)

CFDRTCD

Rate Code Maintenance - 4.4.1 Define Floating Rate Codes (p. 41)

CFDRTSRC

Rate Source Definition - 4.5 Define Rate Sources (p. 45)

CFDRTTYP

Rate Type Definition - 4.6 Define Rate Type (p. 46)

CFDFLRAT

Floating rate Maintenance - 4.7 Define Float Rates (p. 47)

SEDXMTCD

Market Definition - 4.11 Maintain Market Details (p. 49)

SEDSPRTY

Settlement Parties Maintenance -4.12 Maintain Settlement Parties (p. 56)