Equivalent

The Jolly Contrarian’s Glossary
The snippy guide to financial services lingo.™

Index — Click the ᐅ to expand: Glossary

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Warning: metaphysical area approaching. Approach stacked turtles with care.

AKA fungible. When you you have been given something — credit support, for very good example — which at some point you’ll have to give back. You have to give an identical thing back.

Now, when it comes to return it, dilemma: you’ve been mucking around with it. You don’t still have “it”, per se. You can go and buy a new one, but the actual one they gave you — that’s goneski.

Hey — you got it by title transfer, so it was yours to muck around with wasn't it? Or, hey, ok so they pledged it to you, but you had, you know, a right of rehypothecation didn’t you, so you were allowed to muck around with it.^[1]

All true. And just so. In any case, you want to hand over something that is identical to, but isn’t exactly the something that you were given. But it is exactly the same. For most purposes in this day and age that is fine, and indeed will support your title transfer analysis, should you be in the market for a true sale opinion.

Seeing as, in the case of dematerialised securities held in a clearing system (in other words all transferable securities) this is a rather arid ontological distinction at the best of times, but it is one must firmly in the front of one’s mind when considering fundamental tools of our trade — close-out netting, stock lending, rehypothecation (anything that involves a title transfer collateral arrangement really) — lest the whole intellectual superstructure of modern credit risk mitigation should collapse before your eyes.

Fungible
2010 GMSLA: Equivalent
Global Master Repurchase Agreement: Equivalent
“Heavier than air flight is impossible”. I mean, how is this 580 tonne aeroplane, which I am sitting in thirty thousand feet in the air, not falling out of the sky (and onto Chicken Licken’s head)?
Title transfer collateral arrangement
Pledge

↑ Or, just as commonly and more innocuously, you held it in a dematerialised omnibus custody account, with fungible assets owned by other customers, and never did anything with it, but you still can’t tell whose bit is whose.

[1] Or, just as commonly and more innocuously, you held it in a dematerialised omnibus custody account, with fungible assets owned by other customers, and never did anything with it, but you still can’t tell whose bit is whose.

[1]

Equivalent

See also