In the case of Repo Trading using general collateral (GC) Basket(s), we will be defining and identifying collateral basket(s) as below in the message:
“The collateral basket is identified in UnderlyingInstrument component with UnderlyingSecurityType(310)=COLLBSKT (Collateral basket). If ISIN of the collateral basket is known, it can be specified in UnderlyingSecurityID(309) with UnderlyingSecurityIDSource(305)=4 (ISIN).”
Once the trade has been done and comes to the collateral assignment process, how should the trading party populate/specify the “Basket” info(Symbol/ID) with the exact collateral security(ies) using the UnderlyingInstrument component in message?
If you are using CollateralAssignment then the msg should reference the order you’re assigning collateral to (e.g via ClOrdID or OrderID). What I would do is instead of identifying the basket, identify the securities in each instance of UnderlyingInstrument since that component is within UndInstrmtCollGrp which is a repeating group. So if you’re assigning 5 exact collateral securities then there are 5 instances in this group and each instance identifies the exactly security.
Thanks for your reply. But I would like to clarify with the example you mentioned:
How could we know which collateral securities belong to which basket? Let say within this 5 securities, 2 belong to GC Basket A, 3 belong to GC Basket B using the UnderlyingInstrument component?
Just so I understand what you’re trying to do. For a given repo trade you actually want to collateralize it with specific securities from two different GC baskets? Were those two GC baskets identified as part of the initial order or RFQ as well?
Yes, the two GC Baskets were identified as part of the initial RFQ under the UnderlyingInstrument component with the basket ids as the guideline suggested
“The collateral basket is identified in UnderlyingInstrument component with UnderlyingSecurityType(310)=COLLBSKT (Collateral basket). If ISIN of the collateral basket is known, it can be specified in UnderlyingSecurityID(309) with UnderlyingSecurityIDSource(305)=4 (ISIN).”
So just wonder how should we collateralize/specify the actual securities from the two GC baskets using the UnderlyingInstrument component in the CollateralAssignment message. Please kindly advise. Thanks
To recap what you’re trying to do, post-trade of a Repo trade where you have already identified it will be collateralized with BasketA and BasketB, but in the post trade collateral assignment you want to specify that SecurityA and SecurityB from BasketA and SecurityC from BasketB, the key is identifying the baskets.
If I understand correctly there is no standard way to identify BasketA. You can, as I mentioned earlier, specifically identify SecurityA and SecurityB if you want to be specific, but not able to qualify they are part of BasketA. You can use the mentioned field UnderlyingSecurityGroup(2008) but is not really defined for this purpose as it is about exchanges grouping securities for market event purposes.
As I recall (this might be dated information) when two parties formulate their master agreement so that they can conduct repo transactions, typically one of the things agreed are the collateral baskets and its constituents. If that is still true, wouldn’t the party receiving the CollateralAssignment mesg know which basket the security is from?