Template:Buy-in: Difference between revisions
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====Exercising a {{gmslaprov|buy-in}}==== | ====Exercising a {{gmslaprov|buy-in}}==== | ||
Note that to determine the {{gmslaprov|Default Market Value}} where a {{gmslaprov|defaulting party}} is failing on a delivery of {{gmslaprov|securities}} or {{gmslaprov|collateral}} under a {{gmslaprov|loan}} the {{gmslaprov|non-defaulting party}} must '''sell''' (''not'' buy) securities equivalent to those it is expecting back from a {{gmslaprov|Non-Defaulting Party}}. This, we think, is to ensure that the price is | Note that to determine the {{gmslaprov|Default Market Value}} where a {{gmslaprov|defaulting party}} is failing on a delivery of {{gmslaprov|securities}} or {{gmslaprov|collateral}} under a {{gmslaprov|loan}} the {{gmslaprov|non-defaulting party}} must '''sell''' (''not'' buy) securities equivalent to those it is expecting back from a {{gmslaprov|Non-Defaulting Party}}. This, we think, is to ensure that the price is “real”: the temptation otherwise would be for the {{gmslaprov|Non-Defaulting Party}} to accept any old bid or offer, safe in the knowledge it can pass the cost on to the {{gmslaprov|Defaulting Party}}. | ||
Tricks to watch out for, especially in illiquid stocks, is that the {{gmslaprov|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 {{gmslaprov|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. | ||
Revision as of 11:40, 14 October 2020
Exercising a buy-in
Note that to determine the Default Market Value where a defaulting party is failing on a delivery of securities or collateral under a loan the non-defaulting party must sell (not buy) securities equivalent to those it is expecting back from a Non-Defaulting Party. This, we think, is to ensure that the price is “real”: the temptation otherwise would be for the Non-Defaulting Party to accept any old bid or offer, safe in the knowledge it can pass the cost on to the Defaulting Party.
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.