8.8 Rate Fixing Process

This topic describes the rate fixing process.

As a treasury Management system, OBTR can handle rate-fixing procedure on floating interest rate type of contracts. Interest rate for floating transactions are adjusted from time to time at an agreed upon frequency and date. Floating interest rates typically change based on a reference rate.

On the fixing date, the rate is set according to a predetermined index, plus a spread. After a rate fix the floating interest rate is established for the next period. System trigger s a new Rate fixing event RTFX through online process and an outgoing confirmation message mapped to rate fixing event generates instantly notifying the new rate and interest amount.

On the scheduled revision date the rate fixed comes into effect, the rate revision event picks the rate fixed during the rate fixing process and further accruals happen on the new revised rate.

If rate fixing event is not processed either manually from the Rate fixing screen or during BOD batch then during MM EOD batch processing system should check for effective date rate and if available, rate fixing is processed based on the flag set for Proceed with previous available rate.

At Treasury branch parameter maintenance screen STDTRBRN, a preference check Proceed with previous available rate is introduced and is considered during both rate revision and rate fixing process during EOD. Default value of this field will be checked.

In case when Proceed with previous available rate preference is enabled, during EOD processing system will check for rate availability for that particular effective date in the Floating rate table and if rates are not available for that date, then Rate fixing & revision event will be applied on instruments with the previous latest rate available in the system.

Whereas when 'Proceed with previous available rate' check box is not enabled, during EOD processing system will skip the Rate fixing and revision event on respective contract in case when the rate for that effective date is not available.

For every revision schedule, which applies a rate fixing during EOD processing, a new rate-fixing event RTFX will trigger at the contract level. And a SWIFT MT320 message is generated mapped to the RTFX event. In case of a forward movement on fixing days from the revision effective date, rate fix will happen after the revision effective date and interest catch up entries is posted during EOD processing.