Netting Contracts
- Héðinn Þorkelsson (Deactivated)
Overview
Netting multiple forward contracts is possible when you have multiple open contracts for the same customer and for the same underlying asset. The contracts can be on either side (buy/sell) and have various maturity dates. Netting will create a new forward contract that has a quantity that is equal to the sum of all the selected contracts to be netted and has the start price that is the weighted average of the start prices of all the selected contracts to be netted plus accrued interest up until the netting date.
Get Started
To net multiple contracts select all the contracts to be netted from the Contracts data grid in the main window. Multiple select can be done by holding down the Control button while selecting the contracts with the mouse. With multiple contracts selected right click one of the selected contract and choose Netting from the context menu.
The Netting Window
Value date can not be set in the future and not be earlier then the latest value dates of the contracts that are being netted. Value date, maturity date, interests and fees for the new contract are set in the netting window. The start date will determine when the new contract will become active and the forward price will be determined from the start date. Maturity date sets the maturity of the contract and final interest date will be determined on the maturity date, T-1 for bonds and T-3 for stocks. Netting Fee and Transaction Fee will effect the New Start Price for the new contract, The default value for the New Interest Rate and New Interest Rate Fee will be the average interest rate of selected contracts to be netted.
Field | Description |
Symbol | The symbol of the underlying instrument. |
New Quantity | Number of shares the new contract will be (The sum of all contracts to be netted) |
Value Date | The start date when the contract becomes active. |
Maturity Date | The date the contract will expire |
| Final Interest Date | The last day the contract will collect interest, the date the underlying asset gets delivered/received |
Netting + Transaction Fee | Netting fee and Transaction fee that the bank will charge for the netting operation. These fee will added to the Start Price |
Payments | If the underlying asset has had interest or dividend payments over the lifespan of the contract they will be added to the Start price for long contracts and subtracted for short contracts |
New Start Price | The weighted average of all Start Prices from the contracts to be netted plus accrued interests up until netting date plus Netting Fee and Transaction Fee |
| New Contract Amount | The new underlying value for the netted contract |
New Interests | The new interest rate for the netted contract.quoted in percentage |
New Interest Fee | The new interest fee for the netted contract quoted in basis points |
Forward interests | The sum of interests and interests fee will be the forward interests for the netted contract. If this rate is different from the rates on the contracts to be netted the new rate will start to account for from the new value date |
New Forward Price | The forward price is the start price on the netted contract plus accrued Interests until maturity |
New Forward Amount | The value of the contract at maturity
|
Closing Price | This is the closing price that the old contracts that will be closed at given the Value date of the netted contract |