View source for Template:Gmsla 9 summ

====Mini close-out====
This is the fabled '''{{{{{1}}}|mini close-out}}''' provision of the {{gmsla}}. Mini close-out is the method of terminating an individual {{{{{1}}}|Loan}} under a {{gmsla}} or an {{osla}} where there is a settlement failure without actually closing out the whole agreement. It applies therefore to a failure to ''return'' {{{{{1}}}|equivalent}} {{{{{1}}}|securities}} or (in the case of the title transfer GMSLA) {{gmslaprov|equivalent}} {{gmslaprov|collateral}} — these can be a function of market dislocations, upstream counterparty failures and liquidity events affecting the asset in question — but not to the failure to deliver {{{{{1}}}|collateral}} in the first place, seeing as if one kind of {{{{{1}}}|collateral}} is not available, it is in the {{{{{1}}}|Borrower}}’s gift to deliver something else that meets eligibility criteria, so its failure to pony up collateral always looks like a [[credit]] failure and will count as an {{{{{1}}}|Event of Default}}.

If the {{{{{1}}}|Lender}} decides to terminate, you are into the realm of the fabled and famous {{{{{1}}}|mini close-out}}, wherein the {{{{{1}}}|Lender}} exercises rights to terminate and value the {{{{{1}}}|Loan}} by itself ''as if it were'' an {{{{{1}}}|Event of Default}}, whilst not ''actually'' being an {{{{{1}}}|Event of Default}}.

So why isn’t a failure to ''return'' {{{{{1}}}|Securities}} (or {{{{{1}}}|Collateral}}) an {{{{{1}}}|Event of Default}}? Well, this reflects the reality that settlement failures in the equities markets are common and, seeing as the whole point of a [[stock loan]] is to provide the {{{{{1}}}|borrower}} with a security it can [[sell short]], the {{{{{1}}}|Borrower}} is likely to be relying on someone else returning the security to it before it can return the security to the {{{{{1}}}|Lender}} — as such the {{{{{1}}}|Borrower}}’s failure is not necessarily evidence that it is about to auger into the side of a hill.<ref>The same is generally true of {{{{{1}}}|Collateral}} returns (though not {{{{{1}}}|Collateral}} ''deliveries'' - see paragraph {{{{{1}}}|9.2}}.</ref>

The {{{{{1}}}|Lender}} has a self-help mechanism it can use to close out its market risk: a {{{{{1}}}|buy-in}}.

====Non-affected party’s option====
Note that {{{{{1}}}|mini close-out}} is the [[non-affected party|non-affected party’s]] option: If a {{{{{1}}}|Borrower}}, on terminating a {{{{{1}}}|Loan}}, cannot then redeliver the borrowed {{{{{1}}}|Securities}} (because of an upstream failure), it cannot force a {{{{{1}}}|mini close-out}}.

====Failure to return Collateral or Securities is not an Event of Default. What ''is'' then?====
{{GMSLA failures to return equivalent collateral}}

{{Failure to pay under GMSLA}}

====Default interest====
Are references here to [[interest]] to, like ''default'' interest under Clause {{gmslaprov|11.7}}? And if so are we in a world of {{t|LIBOR}} remediation?

Clause {{gmslaprov|11.7}} of the {{gmsla}} is specific to costs following ''actual'' [[close out]] on an {{gmslaprov|Event of Default}} (a {{gmslaprov|Buy-in}} ''isn’t'' an {{gmslaprov|Event of Default}}), and only on professional expenses. The vibe here is ''you reimburse me my ''actual'' costs''. So, the ''actual interest'' cost I incurred in funding the securities I bought in, rather than some abstract derivative notion of my costs represented by a [[benchmark]].

====Replacement costs and ISDA hedging language====
Does it make sense to replace this clause with some convoluted shtick about the costs of {{isdaprov|Replacement Transaction}}s or otherwise hedging the innocent party’s exposure? To determine follow this flow chart: 

[[File:GS Tree.png|frameless|300px|center|Not called the [[vampire squid]] for nothing, you know.]]

====GMSLA netting====
Since prudential requirements to have [[netting opinion]]s do not apply within single transactions, one does not need a mini close-out provision to net within transactions under a GMSLA. That happens as of right. Therefore if, as is often the case, your loan portfolio is all the “same way round” — if you are borrowing from, but never lending to, a lender in a gross jurisdiction, then netting doesn’t really do anything for you. Your problem will be your {{{{{1}}}|collateral}} [[haircut]], for which you will be an unsecured creditor of the lender. To fix this, a pledge GMSLA is what you are looking for. 

====Odd spot====
See the peculiar impact [[mini-closeout]] has on {{isdaprov|Default Under Specified Transaction}} under the {{isdama}}.