Template:Ny csa 6(c) summ: Difference between revisions
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===Rehypothecation in the {{{{{1}}}}}=== | ===Rehypothecation in the {{{{{1}}}}}=== | ||
This is the classic part of your [[security interest]] {{{{{1}}}}} that converts it into a [[title transfer]] CSA, meaning — cough, as with much [[New York law]] frippery — that you might as well not bother with calling this a [[pledge]] or [[security interest]] in the first place. | |||
So I give my asset to you, right, carefully only [[Pledge|pledging]] it as [[Security interest|security]] for my [[indebtedness]] to you, and protect myself from your [[credit risk]] because I ''retain [[beneficial ownership]]'' of the asset. It is mine, not yours, and should you explode into a thousand points of light, then, once I have settled my trading account with your administrator, I can have it back. | So I give my asset to you, right, carefully only [[Pledge|pledging]] it as [[Security interest|security]] for my [[indebtedness]] to you, and protect myself from your [[credit risk]] because I ''retain [[beneficial ownership]]'' of the asset. It is mine, not yours, and should you explode into a thousand points of light, then, once I have settled my trading account with your administrator, I can have it back. | ||
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Note that the {{{{{1}}}prov|Secured Party}}’s right to flog off the {{{{{1}}}prov|Pledgor}}’s asset evaporates should it commit an {{isdaprov|Event of Default}}, {{isdaprov|Early Termination Event}} or one of the {{{{{1}}}}}’s {{{{{1}}}prov|Specified Condition}}s but — courtesy of Paragraph {{{{{1}}}prov|7(ii)}}, the {{{{{1}}}prov|Secured Party}}’s right to call a default as a result of the {{{{{1}}}prov|Pledgor}} continuing to flog off its assets — there doesn’t seem to be an obligation to buy back assets once they’re sold, by the way — only kicks in after 5 {{{{{1}}}prov|Local Business Days}}, by which stage even the guys disconsolately wandering around outside the office clutching [[Iron Mountain]] boxes will have pushed off. | Note that the {{{{{1}}}prov|Secured Party}}’s right to flog off the {{{{{1}}}prov|Pledgor}}’s asset evaporates should it commit an {{isdaprov|Event of Default}}, {{isdaprov|Early Termination Event}} or one of the {{{{{1}}}}}’s {{{{{1}}}prov|Specified Condition}}s but — courtesy of Paragraph {{{{{1}}}prov|7(ii)}}, the {{{{{1}}}prov|Secured Party}}’s right to call a default as a result of the {{{{{1}}}prov|Pledgor}} continuing to flog off its assets — there doesn’t seem to be an obligation to buy back assets once they’re sold, by the way — only kicks in after 5 {{{{{1}}}prov|Local Business Days}}, by which stage even the guys disconsolately wandering around outside the office clutching [[Iron Mountain]] boxes will have pushed off. | ||
Oh, what sad times we live in. | |||
Note the odd coda: references to {{{{{1}}}prov|Posted Collateral}} etc — where, for the purposes of calculating your credit support posting obligations, you are [[deemed]] to still hold it, even though if you don’t — is in part an attempt to state the bleeding obvious: just because you’ve hocked the assets off to someone else doesn’t mean you don’t still have to account to your counterparty for their value in the long run — and, we think, a rather feeble attempt to avoid having to create an “{{vmcsaprov|Equivalent Credit Support}}” concept. Since you've sent the particular asset your counterparty gave you into the great wide open, the thing you'll be giving back will be [[Fungible|economically]], but not [[Ontological certainty|ontologically]], so in theory you don’t hasve to give back the ''exact same one'', even if it does have to be identical with it. Perhaps a concern in 1994, though since {{icds}} went full metal jacket on that enterprise in 1995 when crafting the {{csa}}, it is not like we don’t have suitable, road-tested — if a little anal — language to capture the idea of equivalence. | |||
But anyway |