Imported from previous forum
[ original email was from John Harris - john.harris@bondmart.com ]
For fixed-income securities normally quoted in discount-rate terms (e.g., U.S. Treasury bills), what PriceType is recommended for use in a New Order Single message? Thank you.
John,
This is from the Fiximate reference for Fix 4.4, tag 423 (PriceType):
Code to represent the price type.
Valid values:
1 = Percentage (e.g. percent of par) (often called “dollar price” for fixed income)
2 = Per unit (i.e. per share or contract)
3 = Fixed Amount (absolute value)
4 = Discount – percentage points below par
5 = Premium – percentage points over par
6 = Spread
7 = TED price
8 = TED yield
9 = Yield
10 = Fixed cabinet trade price (primarily for listed futures and options)
11 = Variable cabinet trade price (primarily for listed futures and options)
(For Financing transactions PriceType implies the “repo type” – Fixed or Floating – 9 (Yield) or 6 (Spread) respectively - and Price (44) gives the corresponding “repo rate”.
See Volume 1: “Glossary” for further value definitions)
For fixed-income securities normally quoted in discount-rate terms
(e.g., U.S. Treasury bills), what PriceType is recommended for use in a
New Order Single message? Thank you.
[ original email was from John Harris - john.harris@bondmart.com ]
Thank you, Andrew - saw that, but none of the valid values is consistent with the market’s quote convention, which is a discount rate, not a yield, dollar price, or “points” below par. Since percentage of par can be calculated from discount rate, I suppose we could force our members to do that and send messages containing the calculation result. If anyone has any contrary experience or business practice, I would be grateful for any guidance.
John,
This is from the Fiximate reference for Fix 4.4, tag 423 (PriceType):
Code to represent the price type. Valid values: 1 = Percentage (e.g.
percent of par) (often called “dollar price” for fixed income) 2 = Per
unit (i.e. per share or contract) 3 = Fixed Amount (absolute value) 4 =
Discount – percentage points below par 5 = Premium – percentage points
over par 6 = Spread 7 = TED price 8 = TED yield 9 = Yield 10 = Fixed
cabinet trade price (primarily for listed futures and options) 11 =
Variable cabinet trade price (primarily for listed futures and options)
(For Financing transactions PriceType implies the “repo type” – Fixed or
Floating – 9 (Yield) or 6 (Spread) respectively - and Price (44) gives
the corresponding “repo rate”. See Volume 1: “Glossary” for further
value definitions)For fixed-income securities normally quoted in discount-rate terms
(e.g., U.S. Treasury bills), what PriceType is recommended for use in
a New Order Single message? Thank you.
I think both market practice that we have seen and also the FPL fixed income certification standards call for using the ‘discount’ pricetype for discount instrument trading, possibly not taking a strictly literal interpretation of what ‘percentage points below par’ might mean.
Thank you, Andrew - saw that, but none of the valid values is consistent
with the market’s quote convention, which is a discount rate, not a
yield, dollar price, or “points” below par. Since percentage of par can
be calculated from discount rate, I suppose we could force our members
to do that and send messages containing the calculation result. If
anyone has any contrary experience or business practice, I would be
grateful for any guidance.John,
This is from the Fiximate reference for Fix 4.4, tag 423 (PriceType):
Code to represent the price type. Valid values: 1 = Percentage (e.g.
percent of par) (often called “dollar price” for fixed income) 2 = Per
unit (i.e. per share or contract) 3 = Fixed Amount (absolute value) 4
= Discount – percentage points below par 5 = Premium – percentage
points over par 6 = Spread 7 = TED price 8 = TED yield 9 = Yield 10 =
Fixed cabinet trade price (primarily for listed futures and options)
11 = Variable cabinet trade price (primarily for listed futures and
options) (For Financing transactions PriceType implies the “repo type”
– Fixed or Floating – 9 (Yield) or 6 (Spread) respectively - and Price
(44) gives the corresponding “repo rate”. See Volume 1: “Glossary” for
further value definitions)For fixed-income securities normally quoted in discount-rate terms
(e.g., U.S. Treasury bills), what PriceType is recommended for use
in a New Order Single message? Thank you.
[ original email was from John Harris - john.harris@bondmart.com ]
Thank you, sir.
I think both market practice that we have seen and also the FPL fixed
income certification standards call for using the ‘discount’ pricetype
for discount instrument trading, possibly not taking a strictly literal
interpretation of what ‘percentage points below par’ might mean.Thank you, Andrew - saw that, but none of the valid values is
consistent with the market’s quote convention, which is a discount
rate, not a yield, dollar price, or “points” below par. Since
percentage of par can be calculated from discount rate, I suppose we
could force our members to do that and send messages containing the
calculation result. If anyone has any contrary experience or business
practice, I would be grateful for any guidance.John,
This is from the Fiximate reference for Fix 4.4, tag 423
(PriceType):Code to represent the price type. Valid values: 1 = Percentage (e.g.
percent of par) (often called “dollar price” for fixed income) 2 =
Per unit (i.e. per share or contract) 3 = Fixed Amount (absolute
value) 4
= Discount – percentage points below par 5 = Premium – percentage
points over par 6 = Spread 7 = TED price 8 = TED yield 9 = Yield 10
= Fixed cabinet trade price (primarily for listed futures and
options) 11 = Variable cabinet trade price (primarily for listed
futures and options) (For Financing transactions PriceType implies
the “repo type” – Fixed or Floating – 9 (Yield) or 6 (Spread)
respectively - and Price
(44) gives the corresponding “repo rate”. See Volume 1: “Glossary”
for further value definitions)For fixed-income securities normally quoted in discount-rate terms
(e.g., U.S. Treasury bills), what PriceType is recommended for use
in a New Order Single message? Thank you.
As a follow-up, there is some additional information at http://www.fixprotocol.org/implementation-guide/process.shtml regarding price types:
“6. LastPxPar conditionally required in the Execution Report, Allocation, and TradeCaptureReport messages when LastPx is expressed with a PriceType other than “percent of par” (i.e. when LastPx is expressed as “discount” or “yield” PriceType then LastPxPar must be used to express the price in “percent of par” equivalent.)”
That way the counter party can verify the price calculations, and according to the 4.4 spec:
“If the Initiator deems that there are discrepancies in the Execution Report message received from the Respondent, the Initiator may use the Don’t Know Trade (a.k.a. DK Trade) message type to “reject” the trade information. Resolving the error or discrepancies would be done manually and is currently out of scope for the suggested use of the protocol.” (page 75)
Specifically, the rejecting party would want to send the DKReason code for “Calculation Difference” to indicate a discrepancy between the two prices. Although the use of the “Discount” price type does seem somewhat ambiguous for Order messages, it should be possible to provide a safeguard when agreeing with a counterparty to use a PriceType=4 to mean “Discount Rate” rather than the literal definition in the spec.
I think both market practice that we have seen and also the FPL fixed
income certification standards call for using the ‘discount’ pricetype
for discount instrument trading, possibly not taking a strictly literal
interpretation of what ‘percentage points below par’ might mean.Thank you, Andrew - saw that, but none of the valid values is
consistent with the market’s quote convention, which is a discount
rate, not a yield, dollar price, or “points” below par. Since
percentage of par can be calculated from discount rate, I suppose we
could force our members to do that and send messages containing the
calculation result. If anyone has any contrary experience or business
practice, I would be grateful for any guidance.John,
This is from the Fiximate reference for Fix 4.4, tag 423
(PriceType):Code to represent the price type. Valid values: 1 = Percentage (e.g.
percent of par) (often called “dollar price” for fixed income) 2 =
Per unit (i.e. per share or contract) 3 = Fixed Amount (absolute
value) 4
= Discount – percentage points below par 5 = Premium – percentage
points over par 6 = Spread 7 = TED price 8 = TED yield 9 = Yield 10
= Fixed cabinet trade price (primarily for listed futures and
options) 11 = Variable cabinet trade price (primarily for listed
futures and options) (For Financing transactions PriceType implies
the “repo type” – Fixed or Floating – 9 (Yield) or 6 (Spread)
respectively - and Price
(44) gives the corresponding “repo rate”. See Volume 1: “Glossary”
for further value definitions)For fixed-income securities normally quoted in discount-rate terms
(e.g., U.S. Treasury bills), what PriceType is recommended for use
in a New Order Single message? Thank you.
[ original email was from John Harris - john.harris@bondmart.com ]
Thank you, Andrew - very helpful. What Terry and you suggest sounds right: use the “Discount” price type, even if the definition doesn’t exactly fit. I don’t recall ever seeing a bond price expressed in the way that the “Premium” and “Discount” types are defined, so am not sure what the use case was that resulted in those definitions. In any event, thanks for your guidance.
As a follow-up, there is some additional information at http://www.fixprotocol.org/implementation-
guide/process.shtml regarding price types:“6. LastPxPar conditionally required in the Execution Report,
Allocation, and TradeCaptureReport messages when LastPx is expressed
with a PriceType other than “percent of par” (i.e. when LastPx is
expressed as “discount” or “yield” PriceType then LastPxPar must be used
to express the price in “percent of par” equivalent.)”That way the counter party can verify the price calculations, and
according to the 4.4 spec:“If the Initiator deems that there are discrepancies in the Execution
Report message received from the Respondent, the Initiator may use the
Don’t Know Trade (a.k.a. DK Trade) message type to “reject” the trade
information. Resolving the error or discrepancies would be done
manually and is currently out of scope for the suggested use of the
protocol.” (page 75)Specifically, the rejecting party would want to send the DKReason code
for “Calculation Difference” to indicate a discrepancy between the two
prices. Although the use of the “Discount” price type does seem somewhat
ambiguous for Order messages, it should be possible to provide a
safeguard when agreeing with a counterparty to use a PriceType=4 to mean
“Discount Rate” rather than the literal definition in the spec.I think both market practice that we have seen and also the FPL fixed
income certification standards call for using the ‘discount’
pricetype for discount instrument trading, possibly not taking a
strictly literal interpretation of what ‘percentage points below par’
might mean.Thank you, Andrew - saw that, but none of the valid values is
consistent with the market’s quote convention, which is a discount
rate, not a yield, dollar price, or “points” below par. Since
percentage of par can be calculated from discount rate, I suppose we
could force our members to do that and send messages containing the
calculation result. If anyone has any contrary experience or
business practice, I would be grateful for any guidance.John,
This is from the Fiximate reference for Fix 4.4, tag 423
(PriceType):Code to represent the price type. Valid values: 1 = Percentage
(e.g. percent of par) (often called “dollar price” for fixed
income) 2 = Per unit (i.e. per share or contract) 3 = Fixed Amount
(absolute value) 4
= Discount – percentage points below par 5 = Premium – percentage
points over par 6 = Spread 7 = TED price 8 = TED yield 9 =
Yield 10
= Fixed cabinet trade price (primarily for listed futures and
options) 11 = Variable cabinet trade price (primarily for listed
futures and options) (For Financing transactions PriceType implies
the “repo type” – Fixed or Floating – 9 (Yield) or 6 (Spread)
respectively - and Price
(44) gives the corresponding “repo rate”. See Volume 1: “Glossary”
for further value definitions)For fixed-income securities normally quoted in discount-rate
terms (e.g., U.S. Treasury bills), what PriceType is recommended
for use in a New Order Single message? Thank you.
You’re right. I just pulled it up and read “Discount” price to mean rate, but that’s not the actual words in the spec. It does seem to be an oversight considering it’s such a common way to quote fixed income products.
Without using non-standard values, I would agree that calculating the percentage discount or dollar price would probably be best. I’ll send a ping to my colleagues and see if they’ve ever encountered a similar situation.
Thank you, Andrew - saw that, but none of the valid values is consistent
with the market’s quote convention, which is a discount rate, not a
yield, dollar price, or “points” below par. Since percentage of par can
be calculated from discount rate, I suppose we could force our members
to do that and send messages containing the calculation result. If
anyone has any contrary experience or business practice, I would be
grateful for any guidance.John,
This is from the Fiximate reference for Fix 4.4, tag 423 (PriceType):
Code to represent the price type. Valid values: 1 = Percentage (e.g.
percent of par) (often called “dollar price” for fixed income) 2 = Per
unit (i.e. per share or contract) 3 = Fixed Amount (absolute value) 4
= Discount – percentage points below par 5 = Premium – percentage
points over par 6 = Spread 7 = TED price 8 = TED yield 9 = Yield 10 =
Fixed cabinet trade price (primarily for listed futures and options)
11 = Variable cabinet trade price (primarily for listed futures and
options) (For Financing transactions PriceType implies the “repo type”
– Fixed or Floating – 9 (Yield) or 6 (Spread) respectively - and Price
(44) gives the corresponding “repo rate”. See Volume 1: “Glossary” for
further value definitions)For fixed-income securities normally quoted in discount-rate terms
(e.g., U.S. Treasury bills), what PriceType is recommended for use
in a New Order Single message? Thank you.
[ original email was from John Harris - john.harris@bondmart.com ]
Thank you, sir.
You’re right. I just pulled it up and read “Discount” price to mean
rate, but that’s not the actual words in the spec. It does seem to
be an oversight considering it’s such a common way to quote fixed
income products.Without using non-standard values, I would agree that calculating the
percentage discount or dollar price would probably be best. I’ll send a
ping to my colleagues and see if they’ve ever encountered a similar
situation.Thank you, Andrew - saw that, but none of the valid values is
consistent with the market’s quote convention, which is a discount
rate, not a yield, dollar price, or “points” below par. Since
percentage of par can be calculated from discount rate, I suppose we
could force our members to do that and send messages containing the
calculation result. If anyone has any contrary experience or business
practice, I would be grateful for any guidance.John,
This is from the Fiximate reference for Fix 4.4, tag 423
(PriceType):Code to represent the price type. Valid values: 1 = Percentage (e.g.
percent of par) (often called “dollar price” for fixed income) 2 =
Per unit (i.e. per share or contract) 3 = Fixed Amount (absolute
value) 4
= Discount – percentage points below par 5 = Premium – percentage
points over par 6 = Spread 7 = TED price 8 = TED yield 9 = Yield 10
= Fixed cabinet trade price (primarily for listed futures and
options) 11 = Variable cabinet trade price (primarily for listed
futures and options) (For Financing transactions PriceType implies
the “repo type” – Fixed or Floating – 9 (Yield) or 6 (Spread)
respectively - and Price
(44) gives the corresponding “repo rate”. See Volume 1: “Glossary”
for further value definitions)For fixed-income securities normally quoted in discount-rate terms
(e.g., U.S. Treasury bills), what PriceType is recommended for use
in a New Order Single message? Thank you.