[This message was posted by John Harris of BondMart Technologies, Inc.
<[email protected]> to the "Fixed Income" discussion forum at
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Glen,
Let's take a hypothetical: you are trying to generate an ExecutionReport
message for that money market instrument commonly called "commercial paper"
("CP"). CP is issued, most commonly, at a discount from its "face value,"
i.e., its value at maturity; it bears no interest per se. Rather, the
purchaser receives "interest" as the difference between the price he pays and
the amount he receives at maturity (presuming he holds the instrument to
maturity).
CP thus described trades on a discount-rate basis; that is, the "price" is
expressed as a discount rate. So you could appropriately use "423=4" to convey
to your contra that the PriceType is a discount rate. But if you were also
using the Instrument component block to convey descriptive information about
this CP and particularly the CouponRate field (tag 223), you would set the
value of that field to the numerical equivalent of zero percent (using however
many decimal places you and your contra find agreeable). That is to say, CP is
most commonly a "zero-coupon instrument" and trades on a "discount-rate" basis.
Note that in addition to specifying the coupon and discount rate, you could
also inform your contra of the "yield" of this instrument via the YieldData
component block, which would be yet a third "interest rate." There are any
number of ways of computing yield, as you will discover if you peruse the
YieldData fields.
So, there are many different "interest rates" that hold simultaneously for debt
securities. In order to use FIX properly, you need to know whether you are
trying to convey something inherent in the instrument as a contract between
issuer and holder or about the price at which the instrument trades (separate
from its contractual details) or else about the rate at which the instrument
might be financed.
I hope this helps.
> > Glen,
> >
> > I would respectfully suggest that you clarify the requirement. The "coupon
> > rate" does not make sense as a "price type." The coupon rate is a
> > contractual feature of a debt security and an input into its price.
> >
> > Most likely you are looking for either (a) percentage of par value
> > ("423=1"), (b) yield ("423=9"), or (c) discount rate ("423=4").
> >
> > Best,
> > John
> >
> > > I am using FIX 5.0 sp2.
> > >
> > > In execution report, I need to show rate type as interest rate, coupon
> > > rate or discount rate.
> > >
> > > for discount, it sounds simple.
> > >
> > > I can use tag 423 priceType= 4 for discount.
> > >
> > > but what shall I do for interest rate, coupon rate???
> > >
> > > I try tag65, SymbolSfx. In Spec, it is said
> > > "CD - EUCP with lump-sum interest rather than discount price"
> > >
> > > not quite sure what it means.
> > >
> > > anyone can help on this?
> > >
> > > Many Thanks.
> > >
> > > Glen
>
> Hi John,
>
> Thanks for reply.
>
> The concept is from our legacy system for Money Market Deal.
>
> it got rate type as interest rate, coupon rate or discount rate.
>
> We need represent it with FIX.
>
>
> probably the single tag 423 is not good enough.
>
> what I am thinking :
>
> 1.tag 423=4 for discount.
>
> 2. if tag 223,CouponRate with value, then rate type should coupon rate.
>
> 3. still looking for interest rate
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