Template:M summ Pledge GMSLA 11.4: Difference between revisions

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If the {{pgmslaprov|Non-Defaulting Party}} has actually sold securities {{pgmslaprov|equivalent}} to those it lent, in can treat the price it got as the {{pgmslaprov|Default Market Value}}. If it hasn’t, it must get two or more reference [[market maker]] [[quotation]]s and average those.
If the {{pgmslaprov|Non-Defaulting Party}} has actually sold securities {{pgmslaprov|equivalent}} to those it lent, in can treat the price it got as the {{pgmslaprov|Default Market Value}}. If it hasn’t, it must get two or more reference [[market maker]] [[quotation]]s and average those.
Note that “{{pgmslaprov|Deliverable Securities}}” and “{{pgmslaprov|Receivable Securities}}” are judged from the perspective of the ''{{pgmslaprov|Defaulting Party}}'' being the one having to deliver or receive. This is quite confusing, especially when it comes to the whole question of determining a {{pgmslaprov|Default Market Value}}, which naturally is expressed from the perspective of the ''non''-Defaulting Party, and indeed completely bamboozled the JC for a number of years. In any case, if — as you would expect — the {{pgmslaprov|Defaulting Party}} is failing to deliver {{pgmslaprov|Securities}} or {{pgmslaprov|Collateral}}, the {{pgmslaprov|Non-Defaulting Party}} has to go and get some securities and exercises a {{pgmslaprov|buy-in}}.
   
   
Tricks to watch out for, especially in illiquid stocks, is that the {{pgmslaprov|Non-Defaulting Party}} is not somehow influencing the price at which that innocent third party might transact (by agreeing to enter an offsetting transaction at the same time). That would be fraudulent, of course.
Tricks to watch out for, especially in illiquid stocks, is that the {{pgmslaprov|Non-Defaulting Party}} is not somehow influencing the price at which that innocent third party might transact (by agreeing to enter an offsetting transaction at the same time). That would be fraudulent, of course.

Latest revision as of 11:05, 31 March 2022

How you value a mini close-out where a party can’t redeliver a stock (because it’s been suspended or something). It boils down to how you value either leg of the trade.

If the Non-Defaulting Party has actually sold securities equivalent to those it lent, in can treat the price it got as the Default Market Value. If it hasn’t, it must get two or more reference market maker quotations and average those.

Tricks to watch out for, especially in illiquid stocks, is that the Non-Defaulting Party is not somehow influencing the price at which that innocent third party might transact (by agreeing to enter an offsetting transaction at the same time). That would be fraudulent, of course.

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