Template:Closing out the 2010 GMSLA: Difference between revisions

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===A contrarian’s guide to closing out a {{gmsla}}===
===A contrarian’s guide to closing out a {{gmsla}}===
*'''There’s an Event of Default''': Note that (unlike the {{isdama}} an event only becomes an {{gmslaprov|Event of Default}} once the {{gmslaprov|Non-Defaulting Party}} has given notice of it with no need for the {{gmslaprov|Non-Defaulting Party}} to give a further notice: it has already given one (or not had to, if it’s an event triggering {{gmslaprov|Automatic Early Termination}}. Thus, at once:
*'''There’s an Event of Default''': Note that (unlike the {{isdama}} an event only becomes an {{gmslaprov|Event of Default}} once the {{gmslaprov|Non-Defaulting Party}} has given notice of it with no need for the {{gmslaprov|Non-Defaulting Party}} to give a further notice: it has already given one (or not had to, if it’s an event triggering {{gmslaprov|Automatic Early Termination}}. Thus, at once:
*All payment and delivery obligations are accelerated, becoming due as of the date of the {{eqderivprov|Event of Default}}, which is therefore the Termination Date, although this is not the date on which the close-out is settled - bear with me.
**'''Acceleration''': All payment and delivery obligations are accelerated, becoming due as of the date of the {{eqderivprov|Event of Default}}, which is therefore the Termination Date, although this is not the date on which the close-out is settled - bear with me.
*{{gmslaprov|Non-Defaulting Party}} determines the {{gmslaprov|Default Market Value}} of {{gmslaprov|Deliverable Securities}} as of the {{gmslaprov|Termination Date}}. The {{gmslaprov|Default Market Value}} is determined as of the {{gmslaprov|Default Valuation Time}}, which is at close five dealing days after the {{gmslaprov|Termination Date}} (or the date the {{gmslaprov|NDP}} became aware of it, if an {{gmslaprov|AET}})
**'''{{gmslaprov|Default Market Value}}''': {{gmslaprov|Non-Defaulting Party}} determines the {{gmslaprov|Default Market Value}} for all non cash obligations.
***'''When''': Even though this references the {{gmslaprov|Termination Date}} (being the date of default), it is determined as of the {{gmslaprov|Default Valuation Time}}, namely at close five dealing days ''after'' the date of the default (or for an {{gmslaprov|AET}}, the date the {{gmslaprov|NDP}} became aware of it).
***'''What''':
****Where the NDP has actually bought or sold securities or collateral, it can use the net sale proceeds to calculate the {{gmslaprov|Default Market Value}} for those assets.
****Where it has not, it takes at least two [[dealer quotes]] — offer side for securities it is owed; bid side for those it owes — averages them, and adjusts them for unpaid coupons and transaction costs.
****If it can't do either, it can take its own commercially reasonable estimate of their fair market value, accounting for transaction costs.
*If it hasn't determined the Default Market Value

Revision as of 14:33, 18 September 2018

A contrarian’s guide to closing out a 2010 GMSLA

  • There’s an Event of Default: Note that (unlike the ISDA Master Agreement an event only becomes an Event of Default once the Non-Defaulting Party has given notice of it with no need for the Non-Defaulting Party to give a further notice: it has already given one (or not had to, if it’s an event triggering Automatic Early Termination. Thus, at once:
    • Acceleration: All payment and delivery obligations are accelerated, becoming due as of the date of the Event of Default, which is therefore the Termination Date, although this is not the date on which the close-out is settled - bear with me.
    • Default Market Value: Non-Defaulting Party determines the Default Market Value for all non cash obligations.
      • When: Even though this references the Termination Date (being the date of default), it is determined as of the Default Valuation Time, namely at close five dealing days after the date of the default (or for an AET, the date the NDP became aware of it).
      • What:
        • Where the NDP has actually bought or sold securities or collateral, it can use the net sale proceeds to calculate the Default Market Value for those assets.
        • Where it has not, it takes at least two dealer quotes — offer side for securities it is owed; bid side for those it owes — averages them, and adjusts them for unpaid coupons and transaction costs.
        • If it can't do either, it can take its own commercially reasonable estimate of their fair market value, accounting for transaction costs.
  • If it hasn't determined the Default Market Value
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