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| {{anat|gmsla}}
| | #redirect[[Pledge GMSLA Anatomy]] |
| The [[pledge GMSLA]] is a version of the {{tag|GMSLA}} developed in late 2017 early 2018 where instead of transferring {{tag|collateral}} by [[title transfer]], you [[pledge]] it. Unlike the US standard stock lending agreement, the {{tag|MSLA}}, you don’t [[Rehypothecation|rehypothecate]] the collateral transferred to you, because that would defeat the purpose of pledging it in the first place<ref>An objection that is equally true of a US style pledge, but doesn't seem to have stopped the market insisting on one anyway.</ref>
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| ===What’s it for?===
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| When you borrow securities under a [[GMSLA|stock lending agreement]], you tend to over-collateralise—perhaps you give 105 in value of collateral for 100 of securities borrowed. This leaves you in the unusual position of being, net, a ''creditor'' to your lender: your lender has an obligation to title transfer the collateral back to you. If it is bust it cannot, and even after you apply close out netting, you're in the hole to the tune of 5.
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| With me?
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| Now, if your lender is of dubious repute, from a credit perspective, you might have to hold capital against that credit exposure. Okay, it's only 5, but when you're a bank you do this in big size and it can add up. If, somehow, you can isolate the lender's credit exposure it is worth doing.
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| In most cases, you can't: most lenders will want to use your collateral in their own operations (to defray the lending costs of lending the securities to you, right?). If they do this then the collateral is gone, and you have no choice but to be a creditor.
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| Agent lenders are one class of lender who isn't so bothered about reusing the collateral, because ''it'' didn’t lend to you in the first place, but lent its client’s securities to you, and these clients aren't so bothered about reuse.
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| ===Likely uses for the Pledge GMSLA===
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| A GMSLA would be useful and interesting in the following circumstances:
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| *Where the {{gmslaprov|Borrower}} is a financial institution that would incur a capital/balance sheet charge under [[Basel III|Basel]] rules for the return of excess collateral it has provided by [[title transfer]]
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| *Where the {{gmslaprov|Lender}} does not wish to reuse the collateral, being happy for it to be "dead-ended" in a collateral management system.
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| In other words this is likely to be restricted to [[agent lender]]s and quasi-agent lenders ([[Luxembourg fiduciary|fiduciaries]], [[Espievie|espievies]], [[Repackaging programme|repackaging]] vehicles).
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| ===Close-out===
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| Close out works quite differently.
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| {{table2cell|
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| ===2010 {{gmsla}}===
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| {{Nutshell GMSLA 11.1}}
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| {{Nutshell GMSLA 11.2}}
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| {{Nutshell GMSLA 11.3}}
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| {{Nutshell GMSLA 11.4}}
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| {{Nutshell GMSLA 11.5}}
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| {{Nutshell GMSLA 11.6}}
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| {{Nutshell GMSLA 11.7}}
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| {{Nutshell GMSLA 11.8}}
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| ===2018 Pledge {{gmsla}}===
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| {{Nutshell GMSLA 2017 11.1}}
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| {{Nutshell GMSLA 2017 11.2}}
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| {{Nutshell GMSLA 2017 11.3}}
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| {{Nutshell GMSLA 2017 11.4}}
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| {{Nutshell GMSLA 2017 11.5}}
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| {{Nutshell GMSLA 2017 11.6}}
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| {{Nutshell GMSLA 2017 11.7}}
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| {{Nutshell GMSLA 2017 11.8}}
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| }}
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| {{ref}}
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