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Template:M summ Pledge GMSLA 11: Difference between revisions
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Unlike under the {{gmsla}} the netting mechanic doesn’t ''do'' much. There isn’t much to net. The {{pgmslaprov|Lender}} has a large claim against the {{pgmslaprov|Borrower}}, for the {{pgmslaprov|Default Market Value}}, and it satisfies this by enforcing its security under a separate {{pgmslaprov|Security Deed}}. To reiterate what should be obvious, under a pledged collateral arrangement the credit mitigation is by way of [[Security interest|security]], not [[Close-out netting|netting]]. | Unlike under the {{gmsla}} the netting mechanic doesn’t ''do'' much. There isn’t much to net. The {{pgmslaprov|Lender}} has a large claim against the {{pgmslaprov|Borrower}}, for the {{pgmslaprov|Default Market Value}}, and it satisfies this by enforcing its security under a separate {{pgmslaprov|Security Deed}}. To reiterate what should be obvious, under a pledged collateral arrangement the credit mitigation is by way of [[Security interest|security]], not [[Close-out netting|netting]]. | ||
===So what about the {{pgmslaprov|Collateral}} then?=== | |||
Your {{pgmsla}} leaves you will a closed-out big fat portfolio of receivables owing from the {{pgmslaprov|Borrower}} to the {{pgmslaprov|Lender}}, and a big fat pool of {{pgmslaprov|Collateral}} sitting with the [[triparty agent]], in the {{pgmslaprov|Borrower}}’s name but pledged in favour of the Lender. So the heavy lifting in terms of taking the {{pgmslaprov|pCollateral}} is done by the {{pgmslaprov|pSecurity Deed}}. While, intellectually, this cleaves the normal arrangements under a title transfer {{gmsla}} into two parts, they now work the same way. While it might take a while to work out the Default Market Value, the Lender can exercise on the {{pgmslaprov|Collateral}} immediately there is an {{pgmslaprov|Event of Default}} (though note the Borrower should want some kind of grace period built into failure to pay events reaquiring a period of notice before Collateral can be exercised. It is easier top bvuild that into the definitioin of non-payment-style {{pgmslaprov|Events of Default}} in Paragraph {{pgmslaprov|10}}.<ref>Hint hint — we’ve got some [[Events of Default - Pledge GMSLA Provision|suggested language]] there!<ref> | |||