Applicability - GMSLA Provision

GMSLA Anatomy™ →Go uptown In a Nutshell™ Clause 1: 1. Applicability 1.1 The Parties may enter into Loans through their Designated Offices where one (Lender) transfers securities and financial instruments (Securities) to the other (Borrower) against the transfer by the other of Collateral, with a simultaneous agreement by the Borrower to transfer Equivalent Securities back to Lender at a future date against the return of Equivalent Collateral. 1.2 Each Loan will be governed by this Agreement (and the Schedule, Addenda and Annexes). If there is any inconsistency between an Addendum or Annex and this Agreement, the former will prevail unless otherwise agreed. view template 2010 GMSLA full text of Clause 1: 1. Applicability 1.1 From time to time the Parties acting through one or more Designated Offices may enter into transactions in which one party (Lender) will transfer to the other (Borrower) securities and financial instruments (Securities) against the transfer of Collateral (as defined in paragraph 2) with a simultaneous agreement by Borrower to transfer to Lender Securities equivalent to such Securities on a fixed date or on demand against the transfer to Borrower by Lender of assets equivalent to such Collateral. 1.2 Each such transaction shall be referred to in this Agreement as a Loan and shall be governed by the terms of this Agreement, including the supplemental terms and conditions contained in the Schedule and any Addenda or Annexes attached hereto, unless otherwise agreed in writing. In the event of any inconsistency between the provisions of an Addendum or Annex and this Agreement, the provisions of such Addendum or Annex shall prevail unless the Parties otherwise agree. view template 2010 GMSLA: Full wikitext · Nutshell wikitext | GMLSA legal code | GMSLA Netting Pledge GMSLA: Hard copy (ISLA) · Full wikitext · Nutshell wikitext | 1995 OSLA: OSLA wikitext | OSLA in a nutshell | GMSLA/PGMSLA/OSLA clause comparison table From Our Friends On The Internet: Guide to equity finance | ISLA’s guide to securities lending for regulators and policy makers Navigation 2010 GMSLA 1 · 2 · 3 · 4 · 5 · 6 · 7 · 8 · 9 · 10 · 11 · 12 · 13 · 14 · 15 · 16 · 17 · 18 · 19 · 20 · 21 · 22 · 23 · 24 · 25 · 26 · 27 · Schedule · Agency Annex · Addendum for Pooled Principal Agency Loans 2018 Pledge GMSLA 1 · 2 · 3 · 4 · 5 · 6 · 7 · 8 · 9 · 10 · 11 · 12 · 13 · 14 · 15 · 16 · 17 · 18 · 19 · 20 · 21 · 22 · 23 · 24 · 25 · 26 · 27 · 28 · Schedule · Agency Annex Stock lending agreement comparison: Includes navigation for the 2000 GMSLA and the 1995 OSLA Index: Click ᐅ to expand: GMSLA Pledge GMSLA OSLA Tell me more Sign up for our newsletter — or just get in touch: for ½ a weekly 🍺 you get to consult JC. Ask about it here.

Note the "theory" of the trade here, notwithstanding the term "Loan": Like a Repo a GMSLA Loan works as simultaneous agreements to exchange Securities and Collateral by outright title transfer.

• At inception: Title transfer by Lender to Borrower of securities against the title transfer by Borrower to Lender of Collateral;
• At termination: Title transfer by Borrower to Lender of “Equivalent” against the title transfer by Lender to Borrower of “Equivalent” Collateral at a later date.

That is to say that (despite the GMSLA name) there isn’t a “loan leg” and a “collateral leg” as such: each repo/stock loan is as an outright sale against a future obligation to do the reverse. This is not how the market practitioners generally see it and lawyers of a more officious disposition — yes, such creatures do exist —will have to forcibly restrain themselves from correcting their clients at the end of every sentence .

Therefore if counterparty goes insolvent during a trade, the first part of the transaction is fully settled and the administrator is left with a single forward settling transaction under which it is entitled to receive, DVP, an asset against payment of cash or delivery of an asset.

The counterparty's exposure/liability is the net MTM of that forward settling trade: where it is a Borrower its exposure is the haircut owed by the Lender back to it. Where it is a Lender the liability is the haircut you owe back the Borrower.

This is helpful to the netting analysis, which therefore applies only between one stock loan transaction and another (and not within a single stock loan trade). The absence of a netting flag means you cannot offset positive MTMs where you are a Lender versus negative MTMs where you are a Borrower.

Note the effect that intraday margining has on this under Clause 5 of the 2010 GMSLA.