Course Code: 611

Duration: 2 days

Level: Basic

Fee: $1395.00

CPE Credits: 12

Prerequisite: No Prerequisite Required

This two-day seminar introduces participants to the full trade lifecycle for Fixed Income products, from trade execution through settlement. In addition, the processing of principal, interest and corporate action events relevant to fixed income products will be explored. Products covered include U.S. Treasury and government securities, sovereign debt instruments, corporate and municipal bonds, MBS (Mortgage-Backed Securities) and Securitized Products. Processing and Operations for Repo financing, including bi-lateral and tri-party agreements will be discussed. Operations risks and metrics such as key risk indicators are highlighted throughout the program.

Topics for Discussion Include:

Fixed Income Product Overview and Characteristics

• US Treasury and Agency Securities
• Sovereign Debt Instruments
• Corporate and Municipal Bonds
• Mortgage-Backed Securities
• Securitized Products

Fixed Income Marketplaces and Trading

• The function of OTC Dealer marketplaces for Fixed Income securities
• The RFQ (Request For Quote) trading process and "hits and misses"
• Review multi-dealer and ECN electronic trading systems available for fixed income products
• Trade figuration for bonds, including accrued interest
• Position valuation  and calculation of P&L

Confirmation/Affirmation and Trade Matching

• Trade Capture and Enrichment of fixed income trades
• Identify advice of trade details from broker to client, role of the custodian or agent bank, trade allocations, and affirmations of trade details from client or client?s agent back to the broker
• Third party confirmation and trade matching platforms for fixed income securities

• Mandatory fixed income trade reporting (e.g., TRACE and RTRS) by streetside trade counterparties and direct market participants
• Trade matching services such as RTTM (Real-time Trade Matching)
• Identify and discuss the potential sources of trade breaks and discrepancies and how they are resolved

• Central Counterparties (CCP) provided by clearing houses for the fixed income market, such as the Fixed Income Clearing Corporation (FICC), a subsidiary of DTCC, and the London Clearing House (LCH) as examples
• The role of the clearing broker and clearing services
• Calculate settlement date obligations between counterparties and netting facilities provided by the clearing houses
• Collateral and margin requirements for clearing members

• The final exchange of assets, cash and securities, as the final stage of the trade lifecycle
• What is D.V.P. (Delivery vs Payment) settlement and how it occurs in the fixed income market securities settlement and payment systems
• Book-entry securities settlement systems for fixed income products provided by the Depository Trust Company (DTC), the Fedwire, and Euroclear, as examples

• Review the responsibilities of the broker/dealer, custodian and client in settlement

• Recognize when settlement does not occur as the completion of the deal and understand fails as a source of cost and risk to the firm and its customers
• The need for fail control and management
• Penalties and claims that result from fails in the fixed income market

• How MBS products are traded
• Processing steps associated with the allocation of MBS pools to TBA trades.

• 48 hour rule
• Notification and settlement calendars
• Rules for good delivery

• Discuss variations and inventory optimization.
• Recognize the role of EPN (Electronic Pool Notification) to electronically communicate pool delivery information to receiver 
• Trade-for-Trade settlement, netting, and pair-off's
• MBS trade settlement using the Fedwire

Repo and Trade Financing in the Fixed Income Markets

• What is a repo and how are they constructed?
• Requirements for trade financing based on financial projections
• Treasury function and liquidity management
• Front-to-Back lifecycle of a repo, for both bilateral and tri-party agreements

Payments of Principal and Interest and Corporate Actions

• How periodic payments of principal and interest and interest are made on bonds
• Bond redemptions, Callable Bonds and Convertible Bonds
• Impact of Mergers and Acquisitions on bondholders
• Role of the bond trustee, transfer, and payment agents

By the end of this course, participants will be able to:

• Identify the critical functional areas that support the lifecycle of a fixed income trade
• Understand the evolution of electronic trading on multi-dealer platforms in the fixed income markets
• Distinguish the roles played by Dealers, Brokers, Asset Managers, Investors, Custodians and the industry infrastructure in the Fixed Income markets
• Analyze the clearing and settlement venues for fixed income products and how these securities are held in custody
• Define a repo and its place in the fixed income markets
• Discuss principal and interest processing, as well as the impact of corporate actions on fixed income securities
• Identify types of operational risks that are specific to fixed income markets