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GMRA Anatomy™
In a Nutshell™ Clause 8:
8. Substitution
8(a) At any time the parties may agree to vary the Transaction by substituting Purchased Securities for other Securities having a prevailing Market Value at least equal to the Market Value of the original Purchased Securities for which they are to be exchanged (“New Purchased Securities”).
8(b) The parties will substitute the Securities by simultaneous transfer.
8(c) Once varied under this paragraph, a Transaction will continue as though the Purchased Securities included the New Purchased Securities instead of the ones that the parties substiuted.
8(d) The same goes for Margin Securities under any Transaction. Where they make any transfers through a settlement system whose rules require a payment to accompany any transfer the parties must make offsetting payments outside that settlement system, for value the same day, so that the substitution of Margin Securities does not give rise to any net cash payment by either party.
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Global Master Repurchase Agreement full text of Clause 8:
8. Substitution
8(a) A Transaction may at any time between the Purchase Date and Repurchase Date, if Seller so requests and Buyer so agrees, be varied by the transfer by Buyer to Seller of Securities equivalent to the Purchased Securities, or to such of the Purchased Securities as shall be agreed, in exchange for the transfer by Seller to Buyer of other Securities of such amount and description as shall be agreed (“New Purchased Securities”) (being Securities having a Market Value at the date of the variation at least equal to the Market Value of the Equivalent Securities transferred to Seller).
8(b) Any variation under sub paragraph (a) above shall be effected, subject to paragraph 6(d), by the simultaneous transfer of the Equivalent Securities and New Purchased Securities concerned.
8(c) A Transaction which is varied under sub paragraph (a) above shall thereafter continue in effect as though the Purchased Securities under that Transaction consisted of or included the New Purchased Securities instead of the Securities in respect of which Equivalent Securities have been transferred to Seller.
8(d) Where either party has transferred Margin Securities to the other party it may at any time before Equivalent Margin Securities are transferred to it under paragraph 4 request the other party to transfer Equivalent Margin Securities to it in exchange for the transfer to the other party of new Margin Securities having a Market Value at the time of transfer at least equal to that of such Equivalent Margin Securities. If the other party agrees to the request, the exchange shall be effected, subject to paragraph 6(d), by the simultaneous transfer of the Equivalent Margin Securities and new Margin Securities concerned. Where either or both of such transfers is or are effected through a settlement system in circumstances which under the rules and procedures of that settlement system give rise to a payment by or for the account of one party to or for the account of the other party, the parties shall cause such payment or payments to be made outside that settlement system, for value the same day as the payments made through that settlement system, as shall ensure that the exchange of Equivalent Margin Securities and new Margin Securities effected under this sub paragraph does not give rise to any net payment of cash by either party to the other.
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