A stapled security is a type of financial instrument consisting of two or more securities that are contractually bound to form a single tradable unit; they cannot be bought or sold separately.
They can be composed of similar of different asset classes, for example 2 REITS or equity of different companies (legal entities), or an equity and units in a trust. These details would be found in the prospectus or offering document of the stapled securities (which should be checked).
This article explains how to model a stapled security in your positions file, so you can monitor such a holding against Shareholding Disclosure rules.
How to model in your positions file
Given that a stapled security generally gives legal/voting rights to 2 securities that happen to be traded as one unit, we advise to set these up in the FundApps position file as two (or more) separate instruments and assets corresponding to each. Each instrument in the file will represent each security (usually equity) in the stapled security.
The quantity declared on each asset (associated with each instrument) will be the same quantity one holds in the stapled security, assuming one stapled security gives rights to one of each part of the stapled security. If that is not the case, then the quantity of each asset should reflect any multiplying factor.
For the setup of the instruments for each part of the stapled security, be sure to declare values for each part. If, for example, the stapled security gives rights to two separate legal issuers via equity, use different IssuerIDs and IssuerNames for each part. The same goes for other properties like ClassSharesOutstanding or TotalVotingRights etc. In many cases, those values will be the same between the parts but that depends on the information in the stapled security prospectus /offering document. FundApps may be able to help (on a best efforts basis) if you have questions on populating certain fields.
How to model derivatives on stapled securities
The same concept above will apply but the derivative will need to be included as well.
Taking the example of Swaps on a stapled security, note that for Swaps generally, only the equity leg of a swap should be delivered in the position file (or both if there are two equity legs). This means that if you have a Swap on a stapled security composed of two parts, and each part represents shares in separate companies, you would still have two assets (3 instruments: each part of the stapled and the swap):
1. Swap > Equity (part 1 of stapled)
2. Swap > Equity (part 2 of stapled)
If the Swap had two legs, then the above would be duplicated for the other leg.
As normal for Swaps, the quantity needs to reflect how many of the stapled it represents.
Example position file for a swap on a stapled security is attached below.