The consideration for the first leg of the transaction is calculated using the face value and the prevailing yield to maturity of the eligible security. This yield is that which is current at the time that security details are confirmed with Reserve Bank dealers. It is then used to generate a price using the formula defined in AFMA’s Debt Securities Conventions.
Where the Bank cannot identify a timely market price for long-term securities, general collateral will be valued using a yield which is 50 basis points above an equivalent maturity swap rate referenced to 3-month BBSW, while private securities, such as self-securitised RMBS, will be valued at a price equal to 90 per cent of par, prior to the application of margins. For transactions where the Bank is purchasing securities under repurchase agreement, a margin is applied to the market value of the transaction.
The second leg of the transaction will take place on the maturity date of the repurchase agreement. The consideration for the second leg of the transaction is calculated as the consideration for the first leg plus an interest payment. This interest payment is based on the interest rate at which the repurchase agreement was contracted and the term of the repurchase agreement.
The consideration of an outright transaction will be determined by the yield accepted by the Bank in the open market operations and agreed with the counterparty at that time. This yield is then used to generate a price using formulas defined in AFMA’s Debt Securities Conventions. These may be found on AFMA's website as discussed in the previous section.
Delivery of Securities
- Settlement of all securities must be processed through the Austraclear System on a Delivery-versus-Payment (DvP) basis.
- The Austraclear System Day Session is open between 9.15 am and 4.28 pm. Trades (both outright and repurchase agreements) are to be entered during this session. Trades should be completed by the close of the Day Session. Requests for session extensions should be made directly to Austraclear via the Austraclear Help Desk (1300 362 257) or the RITS Help Desk (1800 659 360). An exception to this requirement would be made in the case where a second round of operations was undertaken in the RITS Evening session.
- For instructions regarding specific functionalities refer to the Operating Rules of Austraclear Limited.
- If at any stage it becomes apparent to a counterparty that it may fail to deliver cash or securities to the Bank, contact should be made immediately with the Domestic Markets Desk (+61 2 9551 8321).