Template:M intro repack merger of debt: Difference between revisions

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===“What if the issuer holds its own note for a bit?”===
===“What if the issuer holds its own note for a bit?”===
Creating a [[debt security]] is largely a question of herding a lot of bureaucratic, pedantic and yet strangely wilful cats. Many things need to be done: agency appointments made, clearing systems set up, instructions matched, hedges struck, collateral acquired, global securities authenticated, and many, many documents need to be approved and then signed by many many people.
Issuing a [[debt security]] is largely a question of herding a lot of bureaucratic, pedantic and yet strangely wilful cats.  
 
Many things need to be done: agency appointments made, instruments set up in the clearing systems, instructions matched, hedges struck, collateral acquired, global securities authenticated, and many, many documents need to be approved and then signed by many many people.


There is something to be said for breaking the process down, perhaps parking a newly-minted instrument, [[for the time being]], somewhere safe, while you hunt down and tie up extant loose ends. If the instrument is ''issued'' but yet ''out of harm’s way'': in the fridge, so to speak — one can sort out remaining formalities in relative tranquillity before settling the instrument into the market when all cats are at peace and the trade is finally, irrevocably, on.  
There is something to be said for breaking the process down, perhaps parking a newly-minted instrument, [[for the time being]], somewhere safe, while you hunt down and tie up extant loose ends. If the instrument is ''issued'' but yet ''out of harm’s way'': in the fridge, so to speak — one can sort out remaining formalities in relative tranquillity before settling the instrument into the market when all cats are at peace and the trade is finally, irrevocably, on.  
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The thing about a [[bearer instrument]] is that ''it has no history''. It is what it is, on its face, and none may gainsay it. It comes with no backstory, absent trailing footprints in the sand to indicate whence it came, or by what convoluted route. We neither know nor care where it has been. We care only for where it is ''now''.
The thing about a [[bearer instrument]] is that ''it has no history''. It is what it is, on its face, and none may gainsay it. It comes with no backstory, absent trailing footprints in the sand to indicate whence it came, or by what convoluted route. We neither know nor care where it has been. We care only for where it is ''now''.


Nor does its present holder know. How would it? There is no register of transfers. Title passes by delivery. A ''bona fide'' transferee without notice takes the instrument as it finds it, and that is without context. If a chance encounter with its maker somewhere in its history were to invalidate an instrument, any later holder would be imperilled. How would it know? If this were the deal, we submit, the bond market would not have developed.
Nor does its present holder know. How would it? There is no register of transfers. Title passes by delivery. A ''bona fide'' transferee without notice takes the instrument as it finds it, and that is without context. If a chance encounter with its maker somewhere in its history were to invalidate an instrument, any later holder would be imperilled. How would it know? If this were the deal, the bond market may never have developed.


The issuer of a bearer note may not, [[for the time being]], ''know'' to whom it is indebted: that being so, it must carry “the” debt on its books anonymously, as against the world. As long as it does not control it, the instrument is as good as live, since anyone who comes across it may pick it up and present it for repayment. But because the issuer ''may as well'' treat the debt as continuous, that is not to say that it ''is''.
The issuer of a bearer note may not, [[for the time being]], ''know'' to whom it is indebted: that being so, it must carry “the” debt on its books anonymously, as against the world. As long as it does not control it, the instrument is as good as live, since anyone who comes across it may pick it up and present it for repayment. But because the issuer ''may as well'' treat the debt as continuous, that is not to say that it ''is''.
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