View source for Template:Csa Transfer of Title summ

====Clearing system liens====
In these modern, [[Dematerialised|dematerialised]] but [[distributed ledger|not yet ''entirely'' decentralised]] times, the [[securities]] in a [[clearing system]] — that is, pretty much ''all'' securities — exist only as entries in a ledger maintained by the [[clearing system]]. The individual securities are no longer and have not been for a half-century or more, security-printed, physical things. <ref>See [[common depositary]] for more information.</ref> It may be we are moving “on-chain” but it has not happened yet, and if the speed at which lawyers have given up the legal vestiges of definitive physical securities is anything to go by, it will not happen for some time yet. Sorry, hodlers: I don’t make the rules. ANYWAY.

In any case, like all good [[Intermediary|intermediaries]], the [[clearing system]] gets fees from participants for ''being'' a clearing system. As a kind of [[surety]] against non-payment of these fees, it keeps a [[lien]] on all global securities it holds. All this means is, if you haven’t paid your fees, you can’t have your securities back — conceptually a weird prospect, since you ''can’t'' have your securities back, can you — there ''are'' no physical securities — but in practice, you can’t deal with them without paying your fees, and even more realistic practice, if you do, the clearing systems will just deduct their fees from your sale proceeds. all of this is entirely unobjectionable, entirely normal, should not ever offend or adversely affect anyone, but it is, by the lights of the law, a “security interest” and therefore is regarded as a necessary exception, to be mentioned for the avoidance of doubt and carved out in polite circles whenever one makes sweeping statements as to the lack of any encumbrances on one’s assets.

Now all this sits a long way down the stack of turtles that makes up the modern [[Metaphysics|metaphysical]] financial system — almost so deep as to be beyond the paranoid articulations of an [[ISDA ninja]] — but, as you can see, not ''quite''.

{{Csa title transfer vs pledge‎‎|{{{1}}}}}
====Distributions and Interest Amount====
It used to be so simple, until the {{vmcsa}} came along and started confusing everything with all this talk of {{vmcsaprov|Interest Adjustment}}s versus {{vmcsaprov|Interest Payment}}s.

This part simply requires the holder of credit support to manufacture income back to the poster of credit support — as long as doing so wouldn’t create in itself trigger a further {{csaprov|Delivery Amount}} by the {{csaprov|Transferor}} — thus precipitating a (short) game of operational ping-pong between the two parties’ back office teams.  

How would that happen? [[All other things being equal|All other things staying equal]], it couldn’t: if the {{csaprov|Transferee}}’s {{csaprov|Exposure}} and the {{csaprov|Value}} of the {{csaprov|Transferor}}’s {{csaprov|Credit Support Balance}} stayed the same as it was when [[variation margin]] was last called, the arrival of income on any part of that {{csaprov|Credit Support Balance}} ought to be spirited back to the {{csaprov|Transferor}}: as long as the {{csaprov|Transferee}} was still holding it, the {{csaprov|Transferee}} otherwise would become indebted for the value of that income to the {{csaprov|Transferor}}.

But as we know, {{csaprov|Exposure}}s ''don’t'' just quietly sit there. If they did, there wouldn’t be any need for initial margin, and collecting even variation margin would be less fraught. So if the {{csaprov|Transferee}}’s {{csaprov|Exposure}} has increased, the arrival of that income might serve to fill a hole in the existing coverage, in which case, why pay it away only to ask for it back again? Similarly, the value of a pending but as-yet-unpaid income payment will be priced into the value of the [[securities]] generating it.<ref>It will trade “[[dirty price|dirty]]” until the distribution is paid, at which point it will trade clean.</ref> So even if the {{csaprov|Exposure}} ''hasn’t'' changed in the mean time, the arrival of a [[coupon]] or [[dividend]] will reduce the {{csaprov|Value}} of those [[securities]] on which it was paid, so — [[all other things being equal]] — the {{csaprov|Transferee}} might expect to hang onto the {{csaprov|Distribution}}. <br>
{{Csa Interest Payment summ|{{{1}}}}}
===Interest Amounts under the {{csa}}===
It really ought to be quite simple, and in the {{csa}} it is: if a {{csaprov|Transferor}} has posted [[cash]] — probably less likely back in the day, but in the world of [[regulatory margin]], ''de rigueur'' nowadays — then you get [[interest]] on it — as long as paying interest wouldn’t, in itself, trigger a call for a further {{csaprov|Delivery Amount}} by the {{csaprov|Transferor}} — thus precipitating a (short) game of operational ping-pong between the two parties’ back office teams.  

How would that happen? [[All other things being equal|All other things staying equal]], it couldn’t: if the {{csaprov|Transferee}}’s {{csaprov|Exposure}} and the {{csaprov|Value}} of the {{csaprov|Transferor}}’s {{csaprov|Credit Support Balance}} stayed the same as it was when [[variation margin]] was last called, the arrival of interest on any part of that {{csaprov|Credit Support Balance}} increases its value and, since it was calibrated to equal an exposure exactly, ought to be spirited back to the {{csaprov|Transferor}}: the {{csaprov|Transferee}} otherwise would become indebted for the value of that interest to the {{csaprov|Transferor}}, which for variation margin is not the idea.

But as we know, {{csaprov|Exposure}}s ''don’t'' just quietly sit there. If they did, there wouldn’t be any need for initial margin, and collecting even [[variation margin]] would be less fraught. So if the {{csaprov|Transferee}}’s {{csaprov|Exposure}} has increased, the arrival of that interest might serve to fill a hole in the existing coverage, in which case, why pay it away only to ask for it back again? 

===Interest Amounts under the {{vmcsa}}===
But in the {{vmcsa}} things get a little more complex. There follows an excruciating torture session for innocent and well-loved members of her majesty’s vocabulary, and all to get across a simple point.  In the nutshell to the right I have tried to simplify the drafting but I am a bit jet-lagged and it is testing even my patience. But know this: {{vmcsaprov|Interest Payment}} is a fiddly, time-and resource-consuming pain which will inevitably lead to error, confusion and name-calling. {{vmcsaprov|Interest Adjustment}} — just adding accrued interest to your {{vmcsaprov|Credit Support Balance}} — is far simpler and more elegant: none of this Kafkaesque complexities for netting and offsetting individual payments. It all comes out in the wash.

First, you have the choice between “{{vmcsaprov|Interest Transfer}}” and “{{vmcsaprov|Interest Adjustment}}”.
===={{vmcsaprov|Interest Transfer}}====
Here there is the choice of whether “{{vmcsaprov|Interest Payment Netting}}” applies. As far as the [[JC]] can tell, most market participants have switched this off, we surmise simply to avoid the torture of figuring out what you have to pay if it is switched on.

If {{vmcsaprov|Interest Payment Netting}} does ''not'' apply, then the {{vmcsaprov|Interest Payer}} must pay interest per the agreement in the elections (at Paragraph {{vmcsaprov|11(g)(ii)}}), and note there is no proviso allowing you to cry off if paying this amount would create a new {{vmcsaprov|Delivery Amount}}.

If {{vmcsaprov|Interest Payment Netting}} ''does'' apply then descend we must into the labyrinthine mind of {{icds}}. The short point is that you must work out if, on the same date, the {{vmcsaprov|Interest Payer}} is due a cash payment under the {{vmcsa}}, and if so, net the two off and pay the balance. Again, no proviso for what happens if this payment would lead to a margin call from the {{vmcsaprov|Interest Payer}}.

===={{vmcsaprov|Interest Adjustment}}====
{{vmcsaprov|Interest Adjustment}} is a far simpler method: incoming interest is just added to the {{vmcsaprov|Credit Support Balance}}. If, on your next margin call, net, the {{vmcsaprov|Credit Support Balance}} exceeds your counterparty’s {{vmcsaprov|Exposure}} to you, you get your interest back through the normal mechanism of calling for a {{vmcsaprov|Return Amount}}. All the netting and offsetting happens automatically. The only contingency — and well spotted, {{icds}}, for this one is truly for details freaks — is if you receive ''negative'' interest on your {{vmcsaprov|Credit Support Balance}} such that it wipes out the {{vmcsaprov|Credit Support Balance}} entirely and is ''still'' unsatisfied, then the {{vmcsaprov|Interest Payer}} — and in the case of negative interest, this is the person {{vmcsaprov|Transferor}}, not the {{vmcsaprov|Transferee}} — has to pay the balance. But if you are accruing interest and calling for margin daily, the likelihood of that happening is extremely low, and it is hard to see why you couldn’t just add this to the usual margin call process as well (since it is likely to be a daily process). <br>