MT 340 Field Specifications

25. Field 17F: FRA Discounting

FORMAT

Option F

1!a

(Flag)

PRESENCE

Mandatory in mandatory subsequence B2

DEFINITION

This field specifies whether FRA discounting is applicable or not.

CODES

The following codes must be used (Error code(s): T36):

N	FRA discounting is not applicable
Y	FRA discounting is applicable

USAGE RULES

• FRA discounting is not applicable.

  In a FRA where FRA discounting is not applicable, the calculation on fixing date is done as follows:

  Floating amount = notional amount * settlement rate * day count fraction.

  Fixed amount = notional amount * contract rate * day count fraction.

  If floating amount > fixed amount, then the FRA seller (Floating Rate Payer) pays the absolute (positive) value of the difference between the two amounts to the buyer.

  If floating amount < fixed amount, then the FRA buyer (Fixed Rate Payer) pays the absolute (positive) value of the difference between the two amounts to the seller.

• FRA discounting is applicable.

  When FRA discounting is applicable, the FRA amount is calculated as follows:

  FRA amount = (notional amount * ((settlement rate - contract rate) *day count fraction)) / (1 +(settlement rate * day count fraction)).

  If the FRA amount is positive, the absolute (positive) value of this amount is paid by the FRA seller (Floating Rate Payer) to the buyer.

  If the FRA amount is negative, the absolute (positive) value of this amount is paid by the FRA buyer (Fixed Rate Payer) to the seller.

• FRA yield discounting is applicable.

  When FRA discounting is applicable and the deal is an AUD or NZD FRA then FRA Yield Discounting (as per the 2006 ISDA definitions) will be deemed to apply rather than simply "FRA Discounting".

  FRA amount = notional amount * 365 * ((1 / (365 + (settlement rate * number of days))) - (1 / (365 + (contract rate * number of days))))

  If the FRA amount is positive, the absolute (positive) value of this amount is paid by the FRA buyer (Fixed Rate Payer) to the seller.

  If the FRA amount is negative, the absolute (positive) value of this amount is paid by the FRA seller (Floating Rate Payer) to the buyer.

Note:

In the preceding rules: settlement rate is sum of the floating rate and of the spread contract rate is the fixed rate number of days is the actual number of days for the period