1. Securities Repo User Guide
  2. Risk Free Rates
  3. Securities Repo Contract

Securities Repo Contract

This topic provides the instructions to capture the RFR details in Security Repo Contract.

Login to the homepage and navigate to the Security Repo Contract screen.

Interest call form of the Security Repo Contract screen is enhanced to have similar new fields introduced in Treasury Interest Class Definition (CFDTRINC) screen.

  1. On the Security Repo Contract Screen, click Interest.
    Treasury Interest Class Definition screen is displayed.

    Figure 3-5 Treasury Interest Class Definition

    Description of Figure 3-5 follows
    Description of "Figure 3-5 Treasury Interest Class Definition"
  2. On the Treasury Interest Class Definition screen, specify the details as required.

    During the contract creation, user can change RFR preferences after they are defaulted from product level.

    When the user check or uncheck the RFR flag, map the respective rate code mapping.

    Existing customer margin field is used for RFR spread/margin value.

    Spread Adjustment field is enabled and used only for RFR component. Existing spread field is disabled and nullified for RFR component.

    The system allows mapping of only one RFR interest class as the main component for a contract. The system uses the Existing Rate Fixing Days field as lookback days for RFR Advance methods.

    Note:

    Once contract is saved and authorized, the RFR preferences cannot be changed.

  3. On the Securities Repo Contract Online screen, navigate to the Schedules tab and click Explode.

    Interest rate details are added to schedules explode to display details of interest calculated by system.

    Payment Schedule Details screen is displayed.

    Figure 3-6 Payment Schedule Details

    Description of Figure 3-6 follows
    Description of "Figure 3-6 Payment Schedule Details"
  4. Refer to the provided payment schedule breakup.

    The following details are available:

    Table 3-3 Schedule Breakup

    Field Description

    Interest Rate Details

    • Calculation Date
    • Rate Type
    • Rate Code
    • Principal Basis
    • Base Rate
    • Base Index Rate
    • Spread/Margin
    • Spread Adjustment
    • No. of Days
    • Compound Interest
    • Simple Interest
    • Total Interest
    • Cumulative Interest
    • Rate Pickup Date

    Schedule Details

    Specify the Schedule details.

    Interest Rate Details

    Specify the Interest Rate Details fields.
  5. Effective interest rate is displayed as per the below calculation as an example. Consider a contract with Lookback RFR calculation method with below details:
    • Trade date= 04 March 2020
    • Value date= 04 March 2020
    • Maturity date= 16 March 2020
    • System date= 16 March 2020
    • Principal= USD 95000
    • Lookback days= 1
    • Customer margin=0
    • Spread adjustment= 0
    • Base amount calc method= Lookback compounded
    • Interest basis= Actual/Actual

    Below is the calculation for accruals (based on RFR rates taken as an example)

    Table 3-4 Accrual Calculation

    Calender Date Effective Date Rate Principal Accrual

    4-Mar

    3-Mar

    1.01%

    95000

    2.621585

    5-Mar

    4-Mar

    1.02%

    95002.62

    2.647614

    6-Mar

    5-Mar

    1.03%

    95005.27

    8.020937

    9-Mar

    7-Mar

    1.04%

    95013.29

    2.699831

    10-Mar

    9-Mar

    1.05%

    95015.99

    2.725869

    11-Mar

    10-Mar

    1.06%

    95018.72

    2.751908

    12-Mar

    11-Mar

    1.07%

    95021.47

    2.77795

    13-Mar

    12-Mar

    1.08%

    95024.25

    8.411982

    16-Mar

    14-Mar

    1.09%

    95032.66

    2.877378

    Taking the final accrual as 32.63 USD with a simple interest calculation method for nominal of USD 95000 for a period from 04 March to 16 March 2020, the effective rate is calculated to be:

    Effective rate= 1 + (32.63*365)/(95000*13)= 1.00938947

  6. To ensure that the rates are within the stipulated limits, the Security Repo module supports Minimum and Maximum Rate pick up for RFR enabled contracts.

    If the derived RFR rate for a contract considering the base rate and spread adjustment is less than the minimum rate, the minimum rate maintained is applied on the contract.

    If the derived RFR rate for a contract considering the base rate and spread adjustment is greater than the maximum rate, the maximum rate is applied on the contract overriding the RFR rates.

  7. The SR module supports booking of Repo and Reverse Repo deals having RFR preference enabled Security instruments.

Parent topic: Risk Free Rates