Template:M summ GMSLA 11: Difference between revisions

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(Created page with "ISLA published a curious piece of thought leadership in September 2018 which painted a worst-case scenario timeline for closing out a {{pgmsla}...")
 
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!style="width: 50%"|{{pgmsla}}
!style="width: 50%"|{{pgmsla}}
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|Upon notice of default, {{gmslaprov|Non-Defaulting Party}} can start executing to close risk and have a 5 day window in which to trade and set pricing to allow for liquidity
|Upon notice of default, {{gmslaprov|Non-Defaulting Party}} can start immediately liquidate and has 5 days to trade and set pricing to allow for liquidity. You have to return any excess.
|Upon notice of default {{pgmslaprov|Non-Defaulting Party}} can start executing immediately but have to provide a value for transfer of the pledged {{gmslaprov|Collateral}}. In most cases  {{pgmslaprov|Non-Defaulting Party}} should be able to complete execution and valuation of the {{pgmslaprov|Collateral}} to be released on day 1, but for less [[liquid]] positions it may take longer — potentially up to the permitted 5 days. Once you have valued you are locked in to that number, so if you achieve a lower price than your valuation you cannot come back on the valuation and hence would be your loss.
|Upon notice of default {{pgmslaprov|Non-Defaulting Party}} can theoretically start liquidating but has value the pledged {{gmslaprov|Collateral}} to be transferred. This may take a bit longer in an illiquid market. But seems to the[[JC]] there’s no reason you can’t execute trades in the collateral without physically holding it, seeing as it settles later. Any excess goes back to the pledgor
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|You then net all cashflows including fees and pay any residual or become a debtor for any shortfall
|Cash flows don’t net and hence fees are not covered under the valuation. This does not sound correct, can fees not be incorporated in the SI, as this is potentially large and could put lenders off?
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Revision as of 19:24, 25 January 2021

ISLA published a curious piece of thought leadership in September 2018 which painted a worst-case scenario timeline for closing out a 2018 Pledge GMSLA which made it look quite a bit worse than the corresponding critical path under a normal — hardly calculated to set at ease the jittery nerves of a very modern agent lenderer. The perceived difference was this:

2010 GMSLA 2018 Pledge GMSLA
Upon notice of default, Non-Defaulting Party can start immediately liquidate and has 5 days to trade and set pricing to allow for liquidity. You have to return any excess. Upon notice of default Non-Defaulting Party can theoretically start liquidating but has value the pledged Collateral to be transferred. This may take a bit longer in an illiquid market. But seems to theJC there’s no reason you can’t execute trades in the collateral without physically holding it, seeing as it settles later. Any excess goes back to the pledgor
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