Company Profile
November 14, 2016 | Author: Ehbok Steven | Category: N/A
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c cc c c The title of the study is ³A study on FIMMFX instruments and the process of Investigating & Validating them at HMD Department, Thomson Reuters Bangalore´ cc c c The objectives of the study are as follows:1. To understand the basic operations at FIMMFX pricing team HMD department 2. To know the various instruments handled by FIMMFX team HMD department 3. To know and understand how the prices of different instruments are validated. 4. To understand the flow of prices to different products. 5. To learn and understand the process of solving queries if clients suspect the prices.
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Operations related to Historical pricing of all instruments related to Fixed Income, Money Market and foreign Exchange.
Operations inside Numeric data architecture
End of the day trading prices
Indicative prices for all instruments and not traded prices except if the prices are from the stock exchanges.
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Non-historical prices like real time prices.
Bonds (RICs) not available in NDA c
Numeric data architecture (NDA) is very vast like an ocean; hence all features of NDA cannot be covered. It will take minimum of 5 years to know the entire features of NDA.
Not getting access to all the processes carried out at FIMMFX pricing team.
The entire process is limited only to Thomson Reuters Company.
The scope of the study is mainly concern for the fulfillment of academic purpose and as per company permissions.
Most of the data are highly confidential.
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cc c is an information company created by the Thomson Corporation's purchase of Reuters on 17 April 2008. Thomson Reuters shares are listed on the Toronto Stock Exchange (TSX: TRI) and the New York Stock Exchange (NYSE: TRI). Thomson Reuters is headquartered in Midtown Manhattan, New York City, USA. The Woodbridge Company, a holding company for the Thomson family of Canada, owns 53% of the group which operates in 100 countries, and has over 55,000 employees.
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The Company was founded by Roy Thomson in 1934 in Ontario as the publisher of The Timmins Daily Press. In 1953 Thomson acquired the Scotsman newspaper and moved to Scotland the following year. He consolidated his media position in Scotland in 1957 when he won the franchise for Scottish Television. In 1959 he bought the Kemsley Group giving him control of the Sunday Times. He separately acquired the Times in 1967. He moved into the airline business in 1965, when he acquired Britannia Airways and into oil and gas exploration in 1971 when he participated in a consortium to exploit reserves in the North Sea. In the 1970s, following the death of Lord Thomson, the Company withdrew from media selling the Times, the Sunday Times and Scottish Television and instead moved into publishing, buying Sweet & Maxwell in 1987. In 1989, Thomson Newspapers was merged with The Thomson Corporation. In 1996 The Thomson Corporation effectively doubled its size and ensured future profitability by
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purchasing West Publishing, a purveyor of legal research and solutions including Westlaw
c The Company was founded by Paul Julius Reuter in 1851 in London as a business transmitting stock market quotations. Reuter set up his "Submarine Telegraph" office in October 1851 and negotiated a contract with the London Stock Exchange to provide stock prices from the continental exchanges in return for access to London prices, which he then supplied to stockbrokers in Paris in France In 1865, Reuters was the first organization to report the assassination of Abraham Lincoln in London. The company was involved in developing the use of radio in 1923. It was acquired by the British National & Provincial Press in 1941 and first listed on the London Stock Exchange in 1984. Reuters began to grow rapidly in the 1980s, widening the range of its business products and expanding its global reporting network for media, financial and economic services: key product launches included Equities 2000 (1987), Dealing 2000±2 (1992), Business Briefing (1994), Reuters Television for the financial markets (1994), 3000 Series (1996) and the Reuters 3000 Xtra service (1999).
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c ! c The Thomson Corporation acquired Reuters Group PLC to form Thomson Reuters on April 17, 2008. Thomson Reuters operated under a dual-listed company (³DLC´) structure and had two parent companies, both of which were publicly listed ² Thomson Reuters Corporation and Thomson Reuters PLC. In 2009 it unified its dual listed company structure and stopped its listing on the London Stock Exchange and NASDAQ. It is now listed only as Thomson Reuters Corporation on the New York Stock Exchange and Toronto Stock Exchange (symbol: TRI). Thomson Reuters brands include Sweet & Maxwell in the UK and West Publishing in North America. Reuters and Westlaw are global brands. Company Operations The chief executive officer of the combined company is Tom Glocers, who was the chief executive of Reuters, and the chairman is David Thomson, who was the chairman of Thomson. The Company is organized into two divisions:
Markets Division: formed from integrating Thomson Financial with Reuters. ¬
Sales & Trading
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Enterprise
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Investment & Advisory
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Media
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Professional Division: ¬
Legal ± formerly North American Legal and Legal & Regulatory; primarily West, makers of Westlaw.
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Healthcare & Science ± formerly Thomson Healthcare and Thomson Scientific
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Tax & Accounting ± formerly Thomson Tax & Accounting
Thomson Reuters shares are listed on the Toronto Stock Exchange (TSX: TRI) and the New York Stock Exchange (NYSE: TRI).
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cc c c c $c 1. 2. 3. 4. 5. 6.
HISTORICAL MARKET DATA FUNDAMENTALS PERMISSIONING ESTIMATES MONEY REFERENCE MONEY REAL TIME
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c c c c c c c 1. Financial 2. Health care 3. Legal 4. Media 5. Science 6. Tax and Accounting
*$c TR provides comprehensive information solutions for financial market professionals. The financial products and services offered by Thomson Reuters are as follows: a. Corporate Services: Targeted to Investor Relations, Corporate Communications, and Business Intelligence functions. b. Deal Making: Leading provider of products to the world¶s investment banks, advisory firms, private equity firms, consulting firms and law firms c. Investment Management & Research: Our products help asset management professionals track investment ideas, view portfolio performance, optimize risk d. Wealth Management: Our easy-to-use wealth products let data flow seamlessly from your back-office to your fingertips
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e. Commodities & Energy: Specialist news, rich content and market intelligence, bespoke analytic tools, and order routing abilities via a single desktop solution f. Equities & Derivatives: Solutions deliver a complete and simplified workflow via a combination of content, transactions and collaboration tools g. Fixed Income: Comprehensive news, prices, market data and tools spanning the complete trading cycle for the global fixed income markets h. Foreign Exchange & Money Markets: Trade instantly on multiple venues, from a single platform with real time prices in over 170 currencies, instruments and derivatives i. Post Trade Services: Post Trade Services enables true straight-through processing, reducing your costs and operational risk as well as improving efficiencies j.
Back Office & Accounting: Our solutions empower companies to centralize and optimize their global operations and reduce settlement costs and better manage risk
k. Hedge Fund Solutions: Time-series databases, real-time data, and cross-asset analytics, provide solutions linking investment decisions to trade execution and the back-office l. Quantitative Research and Trading: Differentiated content, timely data, analytics and interoperability critical to the generation of alpha in high frequency trading m. Pricing and Reference Data : Products and services to manage valuation risk and handle pricing, content and reference data integration, distribution and management
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n. Risk Management: Maximize your investment returns. Monitor your enterprisewide and desk-level risk and P&L exposures in real-time. Increase the operational efficiency of your trading infrastructure to reduce costs and improve your ROI o. Individual Traders/Investors: Trading and investment solutions for individual investors, advisors and small corporations p. Independent Advisors: Tools and market data solutions for independent financial advisors
Health care: Provide Critical information for healthcare delivery and management. TR offer products and services for: a. Clinical Decision Support solutions: Clinical Decision Support solutions help pharmacists, nurses, physicians, and public and environmental safety professionals improve clinical outcomes by reducing medication errors, enhancing disease and condition management, and improving clinical workflow. b. Health plans: Discover insight through data-driven innovations for better plan design, proactive care management, more responsive customer reporting, transparent provider performance measurement, and pay-for-performance initiatives ² leading to increased market share c. Hospitals and Health care providers.
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d. Pharmaceuticals: Demonstrating value. Maximizing market uptake. Thomson Reuters has a proven track record of providing rigorous research, real-world data, and analytics to support internal marketing and external stakeholder decision-making. Our solutions address a spectrum of commercialization needs data, researchers, analysts, and modelers e. Research: Gain insights into emerging healthcare issues, program effectiveness, and policy improvement strategies through health services research, tools, and consulting offered by the Healthcare business of Thomson Reuters
Legal: TR provides legal, compliance, intellectual property & government solutions. TR offers the following products: a. Business & Transactional Law: Industry-specific features, financial and regulatory content, and business law research combine in our suite of tools for business practitioners b. Business Intelligence: See the tools that help you learn more about your customers, competitors and prospects to maintain your organization¶s competitive edge c. Client Development & Marketing: Support your firm¶s growth strategy with our electronic marketing, relationship management, market insight tools and consulting services
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d. Consulting Services: Our industry experts provide renowned insight, expertise and guidance on a host of issues, including technology, strategy and discovery e. Intellectual Property: Helping professionals worldwide drive innovation, protect intellectual assets and create maximum value from their ideas f. Risk, Fraud & Investigations: Innovative, smart search technologies combine with our comprehensive databases so that you can be confident in your public records research g. Law Firm Operations: Enhance your firm¶s core business competencies and sharpen your strategic focus with our practice management and operations applications h. Legal Education: Stay current on emerging topics and trends with our bar review, accredited continuing education and other solutions i. Legal Research: Authoritative content, insightful linking and indexing, and powerful search technologies provide the insights and answers to complex issues j.
Litigation: From case evaluation to transcript management, trial and appeals, we¶ve got all the necessary information and tools in one place
Media: TR provides indispensable news and information for media and business professionals. Reuters news is world famous. Some of Reuters news agency products are:
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a. Newswires: text newswires provide print, broadcast and online newsrooms with indispensable source material and ready-to-publish stories in 20 languages b. Video: Cover world events with dedicated teams around the globe who capture, edit and deliver top quality video content c. Pictures: Our award-winning photojournalists distribute up to 1,600 pictures each day covering news, sports, features, entertainment and business d. Digital Syndication: Our ready-to-publish online news packages, online videos and online pictures help your readers be first to receive each day's most important news e. Graphics: We provide a visual analysis of top world news events in the form of news and information graphics, economic and financial charts, along with graphics on other topics f. Financial Information: Reuters financial information services are a powerful source of real-time and historical financial news and data
Science: In the field of science TR is serving academic, government, corporate and pharma R&D professionals. Some of the products are: a. Life Sciences: Essential information, expert services and intuitive technology to support your life sciences discovery and development activities b. Science products: wide range of science products
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c. Scholarly Research, Publishing and Analysis: Whether you are just starting your academic research, an experienced researcher or teacher, or a librarian or administrator, we deliver objective content and the tools to support your role in the research workflow
Tax and Accounting: TR is a leading provider of solutions for accounting, tax and corporate finance professionals. Tax and Accounting products & services are as follows: a. For CPA Firms: More than 50,000 tax, accounting and audit professionals rely on our integrated solutions and the top 100 U.S. CPA firms trust our research and guidance b. For Corporations: See why corporate tax, finance, accounting, trust, payroll and HR professionals choose our integrated workflow solutions and unparalleled expert guidance c. For Law Firms: Whether you're responsible for tax, accounting, estate planning or benefits, join 98 of the top 100 U.S. law firms who depend on guidance from our experts
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) c c "cc c+$c c,c%c The bid price must always be less than the ask price, so you always buy something for less than you sell it. A bond trader will buy from you at the lowest price and then sell at the higher, making a profit. c-$c c cc ".c Remember that bonds price in % So you must remember if you see a price of 100 this represents 100% of its value and it not £100 or £100 or 100 yen. A bond has a Nominal Value eg £1000. Another name for Nominal Value is Par Value. This is the amount that the bond issuer promises to repay at maturity. c/$c *0c&10c 2c3 *0'cc This is the yield: - The annual rate of return on an investment, expressed as a percentage. The Yield combines both the return the investor gets from the coupon payments and possible gains in the bond price. There are many different types of yield that are used by Thomson Reuters clients and many are calculated by us for clients.
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c4$c c 0c *0c 2c c 2 c * c The inverse relationship between price and yield is a fundament pricing rule and will constantly help you looking at data and queries. Price rises and the yield falls and vice versa. c5$c 6 c 7ccc 2 cc 6 cc3 *0. The greater the chances the investor will not get his money back the more return he will want for taking this risk. Corporate bonds will have a higher yield that most government bonds. The lower the credit rating the higher the yield should be. RULE 6: Longer the term the higher the yield
If you lent someone money for a week you would only ask for a small return. But if you lend them the money for 10 years, you are taking much more risk that you won¶t get the money back, so as compensation, you charge a higher return. RULE 7: Different Yield levels for different countries
We have now seen that countries themselves have different rates and risks based on the strength of their economies and the political stability. c c
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This is important as you need to consider the country and market you are dealing with when looking at data to decide if the values are correct. c
RULE 8: Government bonds used as market benchmarks
When companies like IBM or BMW or General Electric issue a bond they use the government yield as the minimum return they need to offer to the market and then add a few basis points. A basis point is a hundredth. The company wants to pay the minimum amount of interest to investors, so will go as low as it can. Lower the yield is, the lower the cost of the borrowingcto the company.
)c c c% c The FX market is Foreign Exchange; you may also hear it called forex. The forex market is the single largest financial market in the world. At its most basic, the market is concerned with exchanging one currency for another but a range of derivatives have been developed over time Why do people exchange currencies?
Import / Export businesses
Travel or holidays
Repatriating profits or payroll for multinational companies
Hedging risk
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Speculation/Investment
The market is mostly traded Over the Counter (OTC). Whereas a stock exchange has limited trading hours, the FX markets can operate 24 hours and are truly global. The majority of trading is done from Monday to Friday but Middle Eastern Gulf countries can trade on a Saturday or Sunday so there is almost always a market open in the world!
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What specific factors would come under Economic?
Interest Rates
Supply and Demand for capital
Purchasing Power Parity (PPP)
Economic conditions ± Inflation rates, unemployment rates, balance of payments and rates of taxation
What specific factors would come under Political?
Type of government in power
The market regulation by government agencies
Government intervention in buying or selling currencies to affect the exchange rates
What specific factors would come under Market sentiment?
The market sometimes moves the way people want it to move mainly through rumor, this usually only has a short term impact
Technical Analysis ± if there are any strong trends or signals then these will tend to have an impact on the market
If a large trade goes through on a platform such as D3000 or EBS then this can have a ripple effect.
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What specific factors would come under Environmental or seasonal?
Weather disasters, Earthquakes and flood damage
In France and Germany there are traditional summer month when large numbers of holiday makers travel abroad requiring substantial amounts of currencies
Multinational corporations convert dividends and interest payments into their local currency before the financial year ends.
An exchange rate always quoted as the price of one currency in terms of another. Currency quotations consist of a 1 c and a !c currency ± the convention when writing a currency pair exchange rate quotation is to put the base currency first and the quote currency second.
Figure - Currency quotation
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c8 c One unit of foreign currency can be exchanged for a variable amount of domestic currency. Example: USD/CHF = 1.2670
c8 c One unit of domestic currency can be exchanged for a variable amount of foreign currency. Example: EUR/USD = 1.2542$ Most currencies are quoted directly, which currency is quoted first is normally the currency which has historically been the strongest or if the country was a colony or protectorate of the United Kingdom and used Sterling as the unit of account. The vast majority of trading is done with the US Dollar as the base or quote currency. This is because the US Dollar is the most liquid and convertible currency in the world, and is used as a reserve currency in many countries. c c Direct Rates: The majority of the spots are contributed directly i.e. it indicates how much of the currency it takes to buy 1 US dollar. For example it takes 1.2 Canadian Dollars to buy 1 US Dollar.
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Indirect Rates: There are some spot rates that are contributed indirectly (Euro Dollar, British Pound, Australian Dollar, New Zealand Dollar) i.e. it indicates the amount of the currency it would get with 1 US dollar. 9$ British Pound spot rate is indirectly quoted; it gives you the amount of US dollar to get 1 British Pound.
The convention when writing a currency pair exchange rate quotation, is to put the base currency first and the quote currency second. For example: c (Base currency)cc c:c c"e currency) (Base currency) " c:c c"e currency)c c
c c c Direct Cross: Rates are when both the currency pairs have the base quote as the US dollar. 9$c ; Canadian Dollar/Japanese Yen Cross Rate
Currency Pairs
Bid
Ask
USD/Currency 1
B1
A1
USD/Currency 2
B2
A2
Cross rates
Bid
Ask
Currency 1/Currency 2
B2/A1
A2/B1
Currency 2/Currency 1
B1/A2
A1/B2c
9$ Calculate ;
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USDCAD
1.2339/1.2344
USDJPY
104.65 / 104.70
Bid for CADJPY=
Bid2/ Ask1
104.65 / 1.2344=84.77
Ask for CADJPY=
Ask2/ Bid1
104.7 / 1.2339 = 84.85
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Indirect Cross: Rates are when one of the currency pairs (EUR, GBP, AUD, and NZD) where the base quote is not US Dollar. ; Euro Dollar/Japanese Yen Cross Rate
Currency Pairs
Bid
Ask
Currency 1/USD
B1
A1
c USD/Currency 2 Cross Rates
B2 Bid
A2c Ask
B1*B2
A1*A2
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Currency 1/Currency 2 c
9$ Calculate ;
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EUR=
1.3255/1.3260
JPY=
104.65 / 104.70
Bid for EURJPY=
Bid1*Bid2
1.3255
*
Ask for EURJPY=
Ask1*Ask2
1.3260 * 104.70=138.8322
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104.65=138.7135
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c c c c c c c Composite Cross Rates are Super RICs with global contributions. RIC structure: ISO Code =. Example: EURJPY=, AUDJPY= Reuters Calculated Cross rates represent cross rates for which pricing is calculated from the underlying super RICs such as Spots. RIC structure: ISO code=R. Example: EURJPY=R, GBPCHF=R c c c c c c c cc @c +.c it is long established -.c it offers the largest range of international rates /.c it is a truly international reference rate 4.c it has a wide commercial use 5.c it enjoys wide international dissemination D.c its mechanism is transparent B.c of the credibility of providing a robust settlement rate C.c of the credit quality of panel banks E.c the banks represented on the panels are active in the cash markets +A.cBBA Libor's London base is significant: well over 20% of all international banks lending and more than 30% of all foreign exchange transactions take place through the offices of banks in London. c
cc Unlike Euro BBA Libor, EURIBOR, the fixing which has been established by the European Banking Federation applies a concept of country quota. Each in-country has at least one bank represented on the Panel and smaller countries will rotate membership of the Panel amongst their leading commercial banks every 6 months.
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EURIBOR has a panel of 48 reference banks from in zone countries as well as international banks. Bank of Tokyo-Mitsubishi, Chase, Citibank, JP Morgan Bank of America and UBS have been selected to represent international banks. The EURIBOR benchmark is vested with the same degree of authority and worldwide acceptance as the existing BBA LIBOR fixing series. It is fixed each day at 11:00 CET by the London Fixings Support team in Reuters and broadcast internationally through a range of distributors. There are also other interest rate fixings for different countries, most countries have them. These can be found from the FIXINGS Speedguide (demonstrate this in Kobra)
Because the mechanism of fixing it, and the prices used, is transparent an IBOR provides a powerful way of settling contracts. They are widely disseminated and so are indisputable. For this reason Interest Rate derivatives such as FRAs and Swaps nearly always use a benchmark fixing for settlement. There are also commercial products which use fixings, for example a corporation might be able to borrow floating rate fund from his bank pegged above a fixing like LIBOR. It is possible for consumers in the UK to buy mortgages based on LIBOR. The current Benchmark interbank rates are also used for pricing bonds, floating rate bonds will normally pay some premium over an IBOR fixing to keep them competitive. Fixed coupon bonds will often be priced against the long term expectations for LIBOR.
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c)"c Now let¶s look at currency fixings. As well as interbank borrowing and lending rates, there are also exchange rate benchmarks used widely in the market. One of the most prominent in Europe are the reference exchange rates published by the European Central Bank on . The ECB publishes a daily set of reference rates for the Euro against various currencies. These are mid rates, averages of buy and sell rates, reported to the ECB by various national banks from in and outside the Euro zone daily and published by about 2:30 CET. Most central banks in the world publish their own fixings as well. The exchange rate fixings are often used for settlement of currency derivatives. Also the middle or back office of a bank will use them to ³mark to market´ their position at the end of the day to calculate each trader¶s profit or loss. Another prominent set of FX fixings are the WM Company/Reuters fixings.
WM
Company take FX prices from Reuters, validate them, and republish them as benchmark fixings. The main fixing is at 4 PM UK time, and they publish additional hourly fixings throughout the day. These are used in a similar way to central bank fixings, but cover a much wider range of currencies than any other provider.
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c>c)"c The ISDA Swap fixings are benchmarks based on Interest Rate Swap settlement rates. We will look swaps in a later module. These are reference rates calculated for US Dollar, Euro, Sterling, Yen, Swissy, Hong Kong Dollar and Canadian Dollar. They are fixed from a panel of banks for each currency using very similar methodology to the LIBOR fixing.
Banks are selected by ISDA (International Swaps and Derivatives
Association) on the basis of their expertise in the market and Reuters calculate distribute the fixing on their behalf. The fixing is used by swap dealers to price swaps, and to mark their position to market to calculate profit and loss statistics. The fixings are Reuters exclusive.
c c)"c The BBAVOLFIX is a fixing on over the counter FX option trading. This is calculated by Reuters from a range of panel banks at 4 PM every day. The fixing is also used by option dealers to mark to market at the end of the day and in pricing subsequent options. The fixings are Reuters exclusive.
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> c c" c&'c FRA¶s first came about in 1983 and are one of the most widely used of the OTC Money Market derivatives. They are used by market players to lock in short-term borrowing and lending rates. They work almost as an insurance policy on IBOR fixings. A ? 0c c 6 is a contract between two parties which fixes the rate of interest that will apply to a *cF c* c c0 for which the following have been 6 0:
The amount and its currency
A future date for the loan/deposit to be drawn/placed
The term.
9 *c UK car manufacturer has to pay £5Million for new machinery in 3 month. The corporate Treasurer is given the instruction and decides to borrow £5Million in 3 months for 6 months
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Taking GBP as an example, the current 3M LIBOR is about 4.80% (rounded to 2 D.P)
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This is where the FRA comes in. The treasurer can buy a 3X6 FRA starting in 3 months and ending in 6 months. The current rate is around 4.9%.
This means that after 3
months the FRA begins with a locked in price of 4.9%. The treasurer still has to borrow at current market rates but one of the following will happen:
c+$ Interest rates have risen. The current 3M LIBOR is now 5.10%. The treasurer borrows 6 million at this rate, but the seller of the FRA has to pay excess over 4.9% to the treasurer at the settlement date (0.2% of the £5 million in this case) c-$ccc Interest Rates have fallen. The current 3M LIBOR is now 4.6%. The treasurer can borrow at this price but because he has a FRA contract he must pay the difference to the seller of the FRA (0.3% of the £5 million in this case)c Key points for a FRA: OTC No exchange of Principal (off balance sheet) Forward-Forward Interest Rates Contracts are named like 3 x 6 : Starting in 3 Months, Ending in 6 Months Used primarily for Hedging
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Interest is Settled at Beginning of FRA period Contact is unbreakable.
Standard conditions are set by the British Bankers
Association but others may be used. There is a low credit risk hence very tight spreads and large contract sizes available. c % c "ccc The FRA is quoted as a two-way price with bid/offer or borrow and lend prices in the same way as for Money Market deposit rates. The first period refers to the starting month from today, the second period refers to the expiry from today, e.g. 3x6 (meaning the contract starts in three months and runs for three months). The following table explains the term of the FRA instrument ± start and end date for loan.
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$c An arrangement between two parties to exchange two different schedules of cash flows for a fixed amount of time. The simplest is called a ³Plain Vanilla IRS´ and exchanges a series of cash flows based on a floating rate and a series based on a fixed rate. They can be thought of as a strip of FRAs. These are an Over the Counter interest rate derivative which can be used to convert a fixed rate payment into a floating rate payment over long periods of time, up to 50 years in some markets. They allow parties access to interest rates which may be better than they could normally receive. The first IRS was set up between IBM and the World Bank in 1981, and once this example was shown to work many multinational corporations started adopting them. A typical swap would be set up as follows: 1. XYZ, a triple A rated company can borrow fixed rate funds at a low fixed rate. They need to borrow $50 million over 5 years and have issued a 6% fixed rate bond to do this but would like to use a floating rate to capitalise on any drops in interest rates. 2. ABC, a company with a credit rating of BBB, also needs to borrow $50 million for 5 years. Due to their lower credit rating they cannot obtain a cheap fixed rate loan cheaper than 7.0% so they take out a floating rate loan at LIBOR plus 1%.
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They would prefer to switch this to a fixed rate so they can predict future payments. ABC and XYZ arrange an interest rate swap to capitalize on their situations which operates as follows:
XYZ pay ABC their floating rate payments of LIBOR + 1%
ABC pay XYZ a fixed rate of 6.75% ! c"c# c
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XYZ Corp receives the payments to cover its bond while paying out LIBOR + 1%. ABC Plc receives the floating rate payments to cover its floating loan, and pays a fixed rate of 6.75% to XYZ Corp. It has therefore met its objective of obtaining a fixed rate loan but for 0.25% cheaper than its bank offered. Many banks are now active in the market, both as market makers to provide a service and to speculate in the hope of making profits. % c ccc
Standard, or Vanilla, swap contracts involve exchanging fixed rate payments for floating rate paymentsc
Like a FRA, there is no exchange of principal. The two parties must first borrow their funds elsewhere.c
The fixed rate 3 is the 13 of the swap or the provider of floating rate fundsc
The fixed rate 2 c is thec ** c of the swap, or the provider of fixed rate fundsc
The two interest rates are called the F 90c*6 and the F* 6c*6c
The floating rate used is normally a benchmark such as LIBORc
The fixed rate is usually derived from the long term treasury bond market.c
Although the two payments may be calculated on different bases, e.g. 3 Month Libor versus an annual fixed rate, they payments are normally synchronized and so only the net value is exchanged ± again like a FRAc
Ric Structure c
Currency code+ semi annual (SB) or Annual (AB)+ Months+ Basis+Delivery Period
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c 0 ± Assign by Euroclear. 9 digits ± all numeric. Eg 017710788, 013904308 > c Gc c F c H> 7 I± The local German code assigned by WertpapierMitteilungen ± a German organisation. Six digit code. Used to be wholly numeric but is now Alphanumeric. Eg 113527, BWB011 ± International Securities Market Association. 6 Digit numeric code assigned by ISMA. Sequential 392311, 508228 0* ± Assigned by London Stock Exchange. Now alphanumeric ± was numeric. ¶Stock Exchange Daily Official Listing code¶ Eg 7250198, 2732033 * ± Assigned by the Swiss Stock Exchange (virtual exchange, located mainly in Zurich). Currently 7 digits, numeric. 2019255, 1238558
± Committee of Uniform Security Identification Procedures.
An American
alphanumeric code consisting of a 4 digit issuer code and 3 digit issue code. Eg 912828DC1, 345397TZ6
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± International Securities Identification Number. 12 digits. Assigned by Euroclear and the main code for nearly all markets. The first two letters are a country code. The rest of the code is based on a local code, like Common Code, Wert or Cusip. The last digit is a check digit generated using a formula. Eg XS0139043086, US345397TZ65 # 6:c # 0 ± Zcodes are internal Reuters codes used for Eurobonds and Swiss foreign bonds. They were historically used as a mini-product on IDN where clients could view a small number of basic T&Cs for a bond. All this information is now available on the Superric, but the Zcodes still exist to link to the superric and to link realtime contributor pricing to a bond. Eg Z6RK, ZH79
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RIC ± Reuters Instrument Code
Rics needed for Realtime and Historical Pricing
c cc Start with the 2 letter country code of the issuer DEc Then have a local code like wert
123456
Then they all have an ³=´
=
Then most have a Ric suffix (Contributor Code) ABNL
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Eg DE123456=ABNL c c 9 6c ± contains prices from a stock exchange. Contributor Code ending is 1, 2 or 3 letters long, eg LU, F, SG, N Eg XS0104599401=PA, CH1238558=S
1 c ± contains pricing from a contributor like JP Morgan London. Always ends in 4-letter Contributor Code, eg JPML. Eg XS010459940=BARL, US912828DG21=DRKW c± the main RIC for a bond and the RIC that nearly all other RICs for the bond will be based on. Ends in an = sign, ie has no Contributor Code ending. On IDN it will show the last three prices from all the contributors for this bond and other data like coupon and maturity date. Eg ES00001288=, XS013904308=
c c± has syntax 0#superRIC. On IDN it contains a list of all the contributors for that bond. The last price from any contributor flows onto the superric. Eg 0#XS013904308=, 0#ES00001288=
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c ± this is called a constituent ric for a government benchmark yield curve. It allows there to be one continuous Ric for a term to maturity as the underlying bonds change. JP5YT=RR, US10YT=RR c ± is not a ric we snap pricing off, instead it¶s more like a mini-product that shows clients the core Terms and Conditions of a bond and also the last 3 prices from ISMA all in one view. RTR Rics only exist for Eurobonds and some European Foreign bonds. XS013904308=RTR, US011391176=RTR
c ± exists for Eurobonds and Treasury Benchmarks and contains the closing and/or intra-day fixes of prices yields and other pricing facts. ;88c ± Set up by Debt Product. Needed for setup of superric on IDN and to set up tolerances on IDN. No pricing snapped. ; ± Reuters Pricing Service. Prices generated by the Reuters Pricing Service from calculations and contacting dealers c
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*0c 2c 7c If there is a FI Query and we can replicate this is in NDA, then follow the steps below to determine the issue. Fc 6c c 6(c 7c F$c 1) Any of the Contributor contributed data on the day in question 2) The TAG setup is correct LF and PU= Y TAG set up is correct. 3) Bond has EJV Asset ID in NDA, PID+PSC combination is not excluded from Composites, Composite Flag is Y, How Priced tool and also check to see if the prices are not in the 120028/120029 exceptions. 4) Continue with Contributor/ Exchange Missing Data investigations. Fc c c 6$c Follow the Composite Correction procedure to resolve the query Fc 6c *3 c0 $c 1) Check if there is a Preferred Composite? 2) If yes, check if the Complex Floater CS field is Y/N in the Interest Definition screen on EJV. Contact the T & C's team to check if the flag is correct. If not, contact SMA or specialist. 3) Continue with Missing Composite data investigations.
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Fc c *3 c0 $c Check with the T & C's team if the Terms and Conditions are correct. If yes contact SMA or specialist. If no, correct T&C. cc c c 0c * * 0c *0c *c 6ccc0 *3 6c @c
7c Fc c c 0c **c 1 c Ic c *3c* 70ccc c c 0cc .cc We can get the list of RIC¶s for that bond from: 1. Chain the super RIC and 2. Issue to quote and Quote to issue OD report and 3. search function on Xtra using any issue level ID and 4. RIC contains search on the RIC syntax got from all 3 methods above. c Check that super RIC in PHE and confirm if both composite and analytics are missing on that date and previous trading dates. If the Composite prices exist then go to step 2. If CPL/CPT/CPN values are missing follow the below steps:
Fc 1 c Ic cc 660$cJcUsing RT chain function and issue to quote OD, search function in 3000 Xtra and the RIC contains search get the list of Contributor RIC¶s from the Underlying RIC. Using the RIC to TAG OD report we can determine if all the Contributor RIC¶s are stored in the respective Contributor Tags.
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If they are not tagged tag them Fc3c*0c1c 660 and source history for these using RDTH and real time speed list from IDN.
Fc 1 c Ic c 660$cJcCheck the tag set up.
Check in PHE if there is data for analytics. If there is no data check if the NO CALC flag is set as yes or no in EJV. If there is no analytics data, then check in the XFI OD report and check if XFI is getting analytics data or not, if not, check with the developers and if XFI is getting analytics data and NDA is not, then check if the super RIC is linked to the correct DPS or not.
We should also check the DBS TS FF Exceptions OD report and check if this bond is there in the list of FF exceptions and resolve accordingly. c * *c c c c Most common problem is that the RIC and the DPS are on 2 different NDA ID¶s and we need to refresh the bonds and get that corrected.
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Check in the DPS to RIC and RIC to DPS OD report if the RIC is linked to the DPS or not and if not contact the T¶s and C¶s and get this corrected or do it yourself out of market hours:
1) Delete both the RIC's from EJV 2) Wait to end date in NDA 3) Then add the correct Underlying RIC first and then the other RIC in to EJV and wait for that to NULL End date in NDA and then add the second super RIC to EJV and reupload the analytics and composite data to NDA on the correct super RIC from the DPS.
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This can be determined in the RIC to pricing OD report and if this is the issue this should be cleared in the Remapping application.
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The denorm process in this case is not happening correctly. Check the mappings in the curve maps screens or the Benchmarks to super RIC mappings OD report and if the mappings are correct, contact the T¶s and C¶s team who did the mappings and check with them. If there are no mappings or the correct facts are missing they should add them. If mappings are there correctly, but still data is not feeding the =RR RIC, there could be a wrong AGI ID mapping by the T & C¶s Analyst. The AGI ID of the =RR RIC and the super RIC should be the same. cc *3 c2 *c 6ccc %;c c1c c 2 * 1*ccc 0 *3 6c 0c;c I@c Check the mappings for the BMK= RIC in the curve maps screens or in the OD report and check if the mappings exist and are set for the correct fact. If the mappings are correct, then check if the AGI ID¶s of the BMK= RIC and the =RR RIC¶s are correct. If it's correct and still data is not flowing, we should request for a delete and re-add of mappings.
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