18:46 Jun 6, 2009 |
English to Spanish translations [PRO] Bus/Financial - Investment / Securities / Fondos mutuos | |||||||
---|---|---|---|---|---|---|---|
|
| ||||||
| Selected response from: Marian Greenfield Local time: 08:00 | ||||||
Grading comment
|
Summary of reference entries provided | |||
---|---|---|---|
http://www.sifma.net/story.asp?id=1388 |
|
Discussion entries: 1 | |
---|---|
xxx may invest the fund´s assets in ***mortgage dollar rolls*** and may also... crédito a tasa revisable / refinanciamiento de hipoteca denominado en dólares Explanation: Podría ser una simplificación de roll-over |
| |
Login to enter a peer comment (or grade) |
derivados denominado en dólares tipo "mortgage dollar roll"; pactos de recompra de hipotecas... Explanation: ... denominadas en dólares |
| |
Grading comment
| ||
Login to enter a peer comment (or grade) |
2 hrs |
Reference: http://www.sifma.net/story.asp?id=1388 Reference information: I. Mortgage Dollar Rolls In its comment letter and at the public hearings, PSA has taken the position that the current accounting treatment of dollar rolls has worked very well and should not be changed. The exposure draft would have changed current accounting treatment, in that all dollar rolls would have to be accounted for as sales, changing the way some investors treat dollar rolls. The Board's subsequent tentative decision would require all dollar rolls to be accounted for as financings, changing the way broker-dealers account for these transactions. PSA is mindful of FASB's goal to reach consistent accounting treatment for similar transactions across industries. In this instance, however, we believe that the purpose and practical results sought by investors entering into dollar roll transactions is different than the purpose and practical results sought by broker-dealers entering into such transactions. Investors principally use dollar rolls for financing purposes, while broker-dealers use dollar rolls as trading or market making positions. Accordingly, the current accounting for dollar rolls as financings by most investors and as purchases and sales by broker dealers is conceptually appropriate and a better reflection of the purpose of the transactions than the Board's most recent tentative decision. A. Different Types of Mortgage Dollar Rolls The term "mortgage dollar roll" covers a variety of transactions that involve an agreement to transfer a mortgage pass-through security in exchange for cash, generally at some future date. Different types of dollar rolls have different characteristics. Some are similar to futures contracts traded on organized exchanges, while others are similar to financing transactions. The different purposes that various types of counterparties have for entering into these transactions are their primary distinguishing characteristics. Unfortunately, however, these characteristics become very confusing in their application to individual mortgage dollar roll transactions, and are extremely hard to isolate from a trading systems and operational stand point. FASB's preliminary conclusion that all dollar rolls be accounted for as financings raises a number of substantive concerns. These concerns fall into two broad categories. One category of concerns relates to the definition of the dollar roll; the other category relates to operational and systems issues, particularly when dollar rolls are cleared through the Mortgage Backed Securities Clearing Corporation ("MBSCC"). While the term mortgage dollar roll is used generically, there are at least two different types of dollar roll transactions. 1. Roll One type of dollar roll (sometimes referred to as a "roll") is simply a risk shifting mechanism pursuant to which an entity enters into a roll transaction rather than taking delivery of the security. This type of transaction is a commitment to deliver a security at a future date, much like a futures contract traded on an exchange. Typically, delivery of the security is not taken at any time. Rather, the entity's strategy is to keep rolling these transactions, thereby earning a trading spread from the price differential of transactions scheduled to settle in different months. Example of a roll transaction - Today, entity A enters into a contract to buy a GNMA 8 pass-through security for June delivery. At any time prior to the June settlement, entity A decides that it does not want to have a forward position on GNMA 8 securities for June and transfers its risk in that position by rolling the transaction to July. The entity's decision to roll the transaction could be based on trading considerations, such as an attractive spread between the June and July prices, or operational concerns, such as not being willing or equipped to receive delivery of the security. Mechanically, entity A sells a GNMA 8 for June delivery and purchases a GNMA 8 for July delivery. These transactions are typically paired-off. The only transfer that takes place is a money transfer representing the difference between the purchase price of the GNMA 8 for July delivery and the sale price of the GNMA for June delivery. No transfer of securities occurs. Issues for FASB - Is it clear whether the proposed accounting treatment of dollar rolls covers transactions that do not involve the delivery of a security? If they are covered, should they be treated as sales or financings? Since the only money that is settled relates to trading spreads between two securities, what is the financing element of such a transaction? We understand that these types of transactions are not within the scope of this project and would continue to be accounted for as forward commitments. 2. Dollar Rolls Another type of dollar roll transaction is a mechanism pursuant to which an entity that owns certain mortgage securities makes them available to the market place in order to obtain cheaper financing. Example of a dollar roll transaction - Today, entity B has a GNMA 8 pass-through security in inventory, on its balance sheet, and lends that security to the marketplace in return for another GNMA 8 security. Mechanically, the entity sells the GNMA 8 from inventory and buys a GNMA 8 for future delivery. Typically, the GNMA 8 security held in entity B's inventory is transferred to the "borrower" and the "borrower" pays for that security. This type of dollar roll presumably allows entity B to obtain cheaper financing than other available alternatives. It appears that this is the type of transaction that is being contemplated in FASB's discussions. PSA believes that the transaction described in the above example may be a financing from the seller/lender's perspective. It may seem reasonable in the abstract to require this transaction also to be viewed as a financing from the buyer/borrower's perspective. However, when the counterparty is a broker-dealer, which is typically the case, certain trading, operational, and system concerns prevent symmetric treatment of these transactions. These concerns are addressed below. |
| |
Login to enter a peer comment (or grade) |
Login or register (free and only takes a few minutes) to participate in this question.
You will also have access to many other tools and opportunities designed for those who have language-related jobs (or are passionate about them). Participation is free and the site has a strict confidentiality policy.