interest rate .coupon rate and discount rate

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Imported from previous forum

2

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

3

[ original email was from John Harris - john.harris@bondmart.com ]
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

4

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.

  1. if tag 223,CouponRate with value, then rate type should coupon rate.

  2. still looking for interest rate

5

[ original email was from John Harris - john.harris@bondmart.com ]
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.

  1. if tag 223,CouponRate with value, then rate type should coupon rate.

  2. still looking for interest rate

6

Hi John,

many thanks. it does help.

cheers,

Glen

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.

  1. if tag 223,CouponRate with value, then rate type should coupon rate.

  2. still looking for interest rate