Clearing Workstation is the application where members can access reports, carry out clearing related activities and register trades.
The OTC Swap Trade Report window in Clearing Workstation™ provides a flexible method for the trade registration of swaps.
The system has a default setting for Modified Following that will be applied on all registered trades. The information is used to generate the cash flow schedule for both the fixed and floating leg. The cash flow schedule can be altered before the trade report is sent in for matching.
The field 1st Roll Date must be populated with a valid bank day; if not, an error message will occur. This is also the case for the trade date, effective date and the termination date. After all fields have been entered, the user can press the Calculate Flows button. This will create all the cash flows for the swap. It is possible to change the dates and the consideration on specific cash flows in order to create a tailor made structure. The system uses a calendar in order to detect future holidays and will adjust the cash flow dates and day count fraction according to the modified following convention. To send the swap in for matching, use the Send button. After the swap is sent, a message will show if it has been matched or if it remains unmatched.
Interest Rate Swaps clearing product guide
Cash Flows and Considerations
The cash flows that are generated in the trade report window are used by the clearing system to generate payment instructions. The floating leg will have a new rate assigned to each period on a date that depends on the Rate reset and Reset days fields. The field Rate reset determines if the rate for the floating leg should be reset at the beginning of the interest rate period (First) or at the end of the interest rate period (Last). The Swedish market standard specifies that the floating rate is reset before the next interest period commences (First). The field Reset days specifies the number of days prior to Rate reset that is used to determine the rate for the next period. In the Swedish market, this is usually two days—meaning that the interest for the coming period will be decided by the three month STIBOR two days prior to the start of the interest rate period.
The size of the fixed rate cash flows are known over the lifetime of the swap. They are a product of the Fixed Rate, Notional Amount and Day Count Method and also calculated by the system when the swap is registered. The first floating rate cash flow is known if the rate has been specified when the swap was registered and is calculated by the system as a product of Floating Rate (+/- Spread), Notional Amount and Day Count Method. All other floating cash flows are unknowns until two days prior to the start of their respective interest rate period.
The exchange of periodic cash flows that are generated during the lifetime of the swap will be managed by Nasdaq. It will distribute settlement reports to all members showing the settlement due for each instrument group and also on a netted level per account and member.
The system has support for the three month STIBOR rate that is calculated and distributed by Nasdaq on a daily basis. The floating rate will be determined by the three month STIBOR rate that is published daily by Nasdaq at 11:05 CET two bank days prior to the start of each floating rate period. The floating rate is expressed in percentage with maximum three decimals.
It is possible to define a positive or negative spread to the three month STIBOR rate that will be added or subtracted from the STIBOR rate that is used for each floating rate period. The standard day count method in the Swedish market for the floating leg is Act/360.
The floating rate is published daily on Nasdaq’s website and through market data vendor systems.
The Fixed Rate is agreed upon by the parties and registered with the swap (four decimal maximum). This rate is considered to be the price for the specific swap contract; it is the required price to receive the floating rate cash flows. The Fixed Rate will usually be calculated as the rate that makes the floating rate cash flows and the fixed rate cash flows equal (i.e., the value of the swap is zero when it is agreed upon).