Background

On a securities lending trade there are various different types of rate that can be applied, including but not limited to:

• Lending Fee – this is the fee charged by the lender for lending the security to the borrower
• Rebate Rate – on a trade collateralised by cash the lender must pay the borrower a rebate on the interest that they earn on the cash
• Cash Reinvestment Rate – the interest rate that is earned by the lender on any cash that has been given to them as collateral by the borrower
• Benchmark Rate – the current interest rate earned from a benchmark index e.g. SOFR
• Spread – the difference between the rate earned by the lender on the cash (i.e. the benchmark rate or the cash reinvestment rate) and the rebate rate paid back to the borrower – often referred to as the Yield as well.

The price attribute is used to hold these rates/fees. Within price there is a priceType enumeration that offers the entry of “InterestRate” as a generic option to capture all of the different rate types.

In a lot of cases where priceType is set to “InterestRate”, the actual type of rate can be inferred from the location of the price attribute. For example, we can generally state that for securities lending trades:

• If the price is under an AssetPayout, then it is a Lending Fee
• If the price is under an InterestRatePayout, then it is a Rebate Rate
• If the price is under a SpreadSchedule, then it is a Spread

However, these do not always stand up to inspection and for some trade types (e.g. cash pool) the type of rate (e.g. fee or rebate) will need to be specified.

It is also problematic when applications try to locate a specific fee or rebate, as they cannot easily determine which price to use.

Proposal

Add new options to PriceTypeEnum of:

• LendingFee
• RebateRate
• Spread

These will allow securities lending trades to exactly specify whether they are a fee, rebate or spread, and also make it easier for implementations to locate the rate that they require.

Note that the reinvestment rate is generally not included on the trade itself and so has not been proposed as an additional priceType.

Compatibility

This is adding new options to an existing enum so has no compatibility issues

Release

CDM V7 dev only

Additional Context

Under price there is also a cashPrice which has some options that look like they could help when determining a fee. These unfortunately are associated to definitive amounts and not rates and thus do not fit our use case. Also, the lending fees we need to represent are associated to the security being lent and not cash.