Capturing Structured Note Trades

Structured Notes are a type of instrument based on the resale of notes issued by an entity. The notes can also be issued by the seller. A sales desk would profit by taking a margin between the prices of the purchase and the sale.

In parallel with the sale of notes to investors, the issuer hedges against the equity risk and obtains a financial rating for its liquidity. The trading desk can either retain a residual position or fully hedge the risk.

Notes are typically sold to investors on or just prior to the issue date and held until the Maturity Date unless a redemption event occurs or the investor requests a sell back.

Choose Trade > Equity > Structured Note to open the Structured Note worksheet from Calypso Navigator or from the Calypso Workstation.

Structured Note Quick Reference

When you open a trade worksheet, the Trade panel is selected by default.

Underlying Configuration

Structured Note products are created using .

Create a Bond Structured Note

Entering Trade Details

You can select a template from the Template field to populate the worksheet with default values. Then modify the fields as applicable.

Or you can enter the trade fields directly. They are described below, see Field Description.

Note that the Trade Date is entered in the Details panel.

Proceed to the other panels as applicable.

Saving a Trade

Press F5 to save the trade, or choose .

You can also press F3 to save the current trade as a new trade, or choose Trade > Save As New.

A description will appear in the title bar of the trade worksheet, a trade id will be assigned to the trade, and the status of the trade will be modified according to the workflow configuration.

Pricing a Trade

A structured note trade requires the following market data: a discount curve and a quote for the equity. If the settlement currency is a different currency than the product currency, then an FX quote is also required.

You will need to define a Dividend Curve and Volatility Curve for the underlying Equity asset. A Discount Curve is required for the settlement currency.

You can choose to check if all required pricing data are available in the Pricing Environment.

Click Price to price the trade.

Trade Lifecycle

You can allocate the trade to multiple books using .

You can terminate the trade using .

You can apply corporate actions using , or using the CORPORATE_ACTION scheduled task.

See also - All Trade Menus for information on functions, menus and panels common to all trade windows.

1. Sample Structured Note Trade

Structured Note Trade Window - Sample Trade

Select the trade type (Buy/Sell/Issue/Upsize/Re-Open/Close).

Enter the unique Identifier or click ... to select the Bond Structured note using the Product Chooser.

Enter the Nominal Amount, Dirty Price, Settle Date, and Yield.

Click Price.

2. Fields Details

Trade Details

Fields

Description

Buy / Sell / Issue / Upsize / Re-Open / Close

Select Buy or Sell as applicable to indicate the direction of the trade from the book’s perspective.

You can switch between the trade directions using the space bar (note that the space bar is not active in the Speed Entry Panel).

Issue, Upsize / Re-Open / Close apply to activity related to bond issues from the processing org.

Ⓘ [NOTE: Close can only be used if issuance has been performed on the product]

Refer to Calypso Fixed Income documentation for details.

Product code

Product description

You can select a structured note using one of the following methods:

•

Select a product code, and type in a few characters of the code value in the adjacent field.

The system searches all the structured notes defined in the system, and those that satisfy the request are displayed in a list.

Select a structured note from the list.

Note that the product code defaults to the Security Code selected in the User Defaults.

•

Click ... to select a structured note from the Product Chooser Window - Help is available from that window.

Once you have selected a structured note, you can click Show to view the product details in the Structured Note Product window.

Nominal

Enter the amount of nominal that is traded. This is the original nominal.

The adjacent field displays the product’s currency.

Dirty Price

The label actually displays the quote type of the product.

Defaults to the market quote as of the trade date if any. Modify as applicable. See Clean Price, Yield and Dirty Price below for details.

If there is no market quote and BOND_FROM_QUOTE is false, we price the product from curve to produce an initial price for trading.

Settle Date

The settlement date defaults to the trade date + the number of settle days specified in the product.

The settlement date uses the holiday calendar of the product to identify business days.

If you change the trade date in the Details panel, double-click the Settle Date label to update the settlement date accordingly.

Proceeds Details

Fields

Description

Principal

The principal amount is calculated as Nominal * Clean Price

Accrual

The amount of accrued interest is calculated based on the Accrual Days.

Settlement

The settlement amount is calculated as principal + accrual

Ccy

The settlement currency defaults to the product’s currency.

Modify as applicable from the drop-down menu.

The FX field is enabled when the settlement currency is different from the product’s currency.

Enter the FX rate between the settlement currency and the product’s currency. The settlement amount is recalculated accordingly.

Price Details

Fields	Description
Clean Price Yield Dirty Price	Enter the clean price, yield, or dirty price, and the other fields will be calculated accordingly. The dirty price is clean price + unit accrual. For structured notes quoted using Price32, you can enter the trade’s price with two, three, or four digits after the dash. The first two digits represent the number of thirty-seconds (between 1 and 31). If the price contains 3 digits, the third digit represents the number of eighths of a thirty second (or 1/256, between 1 and 7). A price entered as "99-022" will be read as [99 + 2/32 + 2/8(1/32)], or 99.0703125. The third digit can also be +, indicating 4/8 of a thirty second. If the price contains 4 digits, the last two digits represent the number of sixteenths of a thirty second (or 1/512, between 1 and 15). Note that the four-digit logic only applies to notes with the tick size 512.
Gross Price	Not used.
Margin	Not used.
Prepay Speed	Not used.

Benchmark Details

Fields	Description
Clean Price	Not used.
Yield	Not used.
Spread	Not used.
Name	Not used.
Market Price	Specify the market price.

Bond Details

Fields	Description
Market Quote	Displays the latest quote as of the trade date, if any. If there is no quote, and BOND_FROM_QUOTE is false, we do not try to calculate a quote from curve.
Next Coupon	Displays the next coupon date.
Accrual days	Displays the number of days between the last coupon date and the settlement date.
Current Nominal Pool Factor	Not used.
Current Coupon	Displays the current coupon rate.

Settlement Details

Fields	Description
Legal entity	The first field identifies the legal entity role. The default role is specified using Utilities > Set Default Role. However, you can change it as applicable. You can select a legal entity of specified role from the second field provided you have setup favorite counterparties. You can also type in a character to display the favorite counterparties that start with that character. Favorite counterparties are specified using Utilities > Configure Favorite Counterparties. Otherwise, click ... to select a legal entity of specified role from the Legal Entity Chooser. You can also type Ctrl-F to invoke the Legal Entity Chooser, or directly enter a Legal Entity short name. Click Show to display the details of the selected legal entity. You can also choose Utilities > Selected Counterparty Info.
Id Ext Ref Int Ref	Unique identification number of the trade. The trade id is automatically assigned by the system when the trade is saved. You can load an existing trade by typing the trade id into this field, and pressing [Enter]. You can also display the internal reference or external reference. The default trade reference to be displayed can be selected in the User Defaults. The internal reference and external reference can be set in the Details panel of the trade worksheet.
Book	Trading book to which the trade belongs. Defaults to the book selected in the User Defaults. You can modify as applicable. You can select a book provided you have setup favorite books. You can also type in a character to display the favorite books that start with that character. Click ... to specify favorite books or Utilities > Configure Favorite Books. The processing org of the book identifies the processing org of the trade.
Trade Date	Displays the trade date specified in the Details panel.
Status	Current status of the trade. The status is automatically assigned by the system based on the workflow configuration. The status will change over the lifetime of the trade according to the workflow configuration and the actions performed on the trade.

Bundle Entry Details

You can associate the trade with a bundle. Bundles are created under Calypso Navigator > Configuration > Books & Bundles > Trade Bundle.

You can also finance the trade, capture an asset swap, capture a performance swap. or capture an interest rate swap by clicking on the corresponding buttons.

Fields	Description
Trade Date	The Trade Date is displayed from the Details panel.
Types	Select a bundle type.
Names	Select a bundle.

Additional Details

Fields	Description
Mirror Book	Select a mirror book if you want to mirror the current trade. You can select the mirror trader from the Details panel. A mirror trade will be saved with the current trade to the selected book, and you can view the mirror trade id from the Details panel.
Market Type	Defaults to the market type selected in the User Defaults. You can modify as applicable. Market types are created in the marketType domain.
Trade Classification	You can select a classification for the trade as applicable. This classification is for information purposes only. It is stored in the trade keyword "TradeClassification", and available values can be set in domain keyword.TradeClassification. It can be used in filters to filter trades for various processes, and can be viewed in reports throughout the system.
Comment	Enter a free comment as applicable.
Commission (%)	For Issue, Upsize, Re-Open, and Close trades, you may specify the commission.