Imported from previous forum
Hi,
We have a question about how people are using the PriceType field (tag 423) in relation to Fixed Income trading.
The defined values for this field in the 4.3 specification are:
Valid values:
1 = Percentage
2 = per share (e.g. cents per share)
3 = Fixed Amount (absolute value)
4 = discount - percentage points below par
5 = premium - percentage points over par
6 = basis points relative to benchmark
7 = TED price (see "Volume 1 - Glossary")
8 = TED yield (see "Volume 1 - Glossary")
We need to support FI trading based on several kinds of prices:
1/ Percent-of-Par Price (Dollar Price)
2/ Yield Spread in Basis Points relative to Benchmark
3/ Yield To Maturity
4/ Discount Yield
Our current assumptions look like this:
1/ 423=1 Percentage
2/ 423=6 basis points relative to benchmark
3/ Not sure.
4/ Not sure.
We would like to stick to FIX 4.3 if possible, but we are interested in any reasonable answer.
What conventions exist for indicating Price Type FIX FI trading?
Andew Thompson
[ original email was from Dean Kauffman - dean.kauffman@tradeweb.com ]
Andrew,
I have to take the blame for the flawed definition of PriceType (423) in the 4.3 spec - on publication of 4.3 the FI working group was just beginning its business analysis and there were many gaps and errors now filled and corrected in 4.4. My urgent recommendation is NOT to use 4.3 for Fixed Income. 4.4 with the 6/18/2003 errata is the official product of the Bond Market Association’s Protocols Initiative.
> Hi,
>
> We have a question about how people are using the PriceType field (tag 423) in relation to Fixed Income trading.
>
> The defined values for this field in the 4.3 specification are:
>
> Valid values:
> 1 = Percentage
> 2 = per share (e.g. cents per share)
> 3 = Fixed Amount (absolute value)
> 4 = discount - percentage points below par
> 5 = premium - percentage points over par
> 6 = basis points relative to benchmark
> 7 = TED price (see "Volume 1 - Glossary")
> 8 = TED yield (see "Volume 1 - Glossary")
>
> We need to support FI trading based on several kinds of prices:
>
> 1/ Percent-of-Par Price (Dollar Price)
> 2/ Yield Spread in Basis Points relative to Benchmark
> 3/ Yield To Maturity
> 4/ Discount Yield
>
> Our current assumptions look like this:
>
> 1/ 423=1 Percentage
>
> 2/ 423=6 basis points relative to benchmark
>
> 3/ Not sure.
>
> 4/ Not sure.
>
> We would like to stick to FIX 4.3 if possible, but we are interested in any reasonable answer.
> What conventions exist for indicating Price Type FIX FI trading?
>
> Andew Thompson
>
[ original email was from Dean Kauffman - dean.kauffman@tradeweb.com ]
In response to your specific question in 4.4 terms -
Yield to Maturity: 423=9 (Yield)
Discount Yield: 423=6 (Spread) [If you mean that the quoted yield is a delta to a benchmark or difference in yield between two securities in a swap. But If you really mean Discount Price - the way short-maturity issues are quoted - use 423=5 (Discount)]
> Andrew,
>
> I have to take the blame for the flawed definition of PriceType (423) in the 4.3 spec - on publication of 4.3 the FI working group was just beginning its business analysis and there were many gaps and errors now filled and corrected in 4.4. My urgent recommendation is NOT to use 4.3 for Fixed Income. 4.4 with the 6/18/2003 errata is the official product of the Bond Market Association’s Protocols Initiative.
>
> > Hi,
> >
> > We have a question about how people are using the PriceType field (tag 423) in relation to Fixed Income trading.
> >
> > The defined values for this field in the 4.3 specification are:
> >
> > Valid values:
> > 1 = Percentage
> > 2 = per share (e.g. cents per share)
> > 3 = Fixed Amount (absolute value)
> > 4 = discount - percentage points below par
> > 5 = premium - percentage points over par
> > 6 = basis points relative to benchmark
> > 7 = TED price (see “Volume 1 - Glossary”)
> > 8 = TED yield (see “Volume 1 - Glossary”)
> >
> > We need to support FI trading based on several kinds of prices:
> >
> > 1/ Percent-of-Par Price (Dollar Price)
> > 2/ Yield Spread in Basis Points relative to Benchmark
> > 3/ Yield To Maturity
> > 4/ Discount Yield
> >
> > Our current assumptions look like this:
> >
> > 1/ 423=1 Percentage
> >
> > 2/ 423=6 basis points relative to benchmark
> >
> > 3/ Not sure.
> >
> > 4/ Not sure.
> >
> > We would like to stick to FIX 4.3 if possible, but we are interested in any reasonable answer.
> > What conventions exist for indicating Price Type FIX FI trading?
> >
> > Andew Thompson
> >
>
Dean, thanks for both of your prompt responses.
> In response to your specific question in 4.4 terms -
>
> Yield to Maturity: 423=9 (Yield)
This actually reminded me of another related question. Where does the Yield itself go? Given an Single Order Request may optionally contain: Yield (236), Price (44), YieldType(235) and/or PriceType (423); how does one send a Yield To Maturity based order?
eg, in FIX 4.4 I could send a New Single Order:
PriceType=9, Price=6.7
or I could send no Price or PriceType at all:
YieldType=MATURITY, Yield=6.7
or I could mix and match.
Naturally one could agree this bilaterally with any given counterparty, but is there a conventional way of doing this sort of thing?
The later approach has the advantage of being possible in pure FIX 4.3 as well as 4.4.
> Discount Yield: 423=6 (Spread) [If you mean that the quoted yield is a delta to a benchmark or difference in yield between two securities in a swap. But If you really mean Discount Price - the way short-maturity issues are quoted - use 423=5 (Discount)]
Unfortunately I don’t think either of those possibilities match. The formula for discount yield is:
Dy = (Dp/Fv) * (360/m)
Dy = discount yield
Fv = face value
Dp = discount price
m = days to maturity
Am I correct in thinking there are no YieldTypes or PriceTypes that correspond to this in FIX 4.4?
[ original email was from Dean Kauffman - dean.kauffman@tradeweb.com ]
You always want to put the quoted or desired price in Price and qualify it with PriceType if necessary. The YieldType of a Price expressed in yield would be understood based on the asset class. The independent Yield and Spread fields should only contain data derived from the Price - never the other way around.
The business analysis group didn’t capture a need to express Discount Yield in the products we covered. I’ll request that “DISCOUNT” YieldType be added in the next spec cycle.
> Dean, thanks for both of your prompt responses.
>
> > In response to your specific question in 4.4 terms -
> >
> > Yield to Maturity: 423=9 (Yield)
>
> This actually reminded me of another related question. Where does the Yield itself go? Given an Single Order Request may optionally contain: Yield (236), Price (44), YieldType(235) and/or PriceType (423); how does one send a Yield To Maturity based order?
>
> eg, in FIX 4.4 I could send a New Single Order:
>
> PriceType=9, Price=6.7
>
> or I could send no Price or PriceType at all:
>
> YieldType=MATURITY, Yield=6.7
>
> or I could mix and match.
>
> Naturally one could agree this bilaterally with any given counterparty, but is there a conventional way of doing this sort of thing?
>
> The later approach has the advantage of being possible in pure FIX 4.3 as well as 4.4.
>
> > Discount Yield: 423=6 (Spread) [If you mean that the quoted yield is a delta to a benchmark or difference in yield between two securities in a swap. But If you really mean Discount Price - the way short-maturity issues are quoted - use 423=5 (Discount)]
>
> Unfortunately I don’t think either of those possibilities match. The formula for discount yield is:
>
> Dy = (Dp/Fv) * (360/m)
>
> Dy = discount yield
> Fv = face value
> Dp = discount price
> m = days to maturity
>
> Am I correct in thinking there are no YieldTypes or PriceTypes that correspond to this in FIX 4.4?
>