Template:Csa Other Posted Support summ

{{{{{1}}}|Other Posted Support}} is to {{{{{1}}}|Other Eligible Support}} as {{{{{1}}}|Posted Collateral}} is to {{{{{1}}}|Eligible Collateral}}: Other Eligible Support provides the universe of allowed forms of non Collateral that can be provided as {{{{{1}}}|Credit Support}} under the CSA; {{{{{1}}}|Other Posted Support}} means the heavenly bodies in that universe that have actually been preferred as {{{{{1}}}|Credit Support}}.

What is this alternative universe, then, and why is it different to {{{{{1}}}|Posted Collateral}}? Well, we think it is things that are not readily transferable, negotiable instruments, but nonetheless function as a credit mitigant. The most obvious is a letter of credit:

Letters of credit

Letters of credit are strange beasts, somewhat out of place in a pure-play derivatives trading world; much more common in the world of trade finance. They are in some senses, a glorified cheque — a letter drawn by a debtor (in this case the “{{{{{1}}}|Pledgor}}”, although it is not actually “pledging” anything here) on its Bank under which the Bank promises unconditionally, and directly to a creditor “beneficiary” to pay a sum of money on demand to the beneficiary at certain times or in certain cases.

Since it is a direct commitment from the bank to the beneficiary it is not, strictly speaking, any kind of security interest granted by the debtor (any more than a cheque would be), hence the the labels “Secured Party” and “Pledgor” in this narrow circumstance are not anatomically accurate, and references to the law and lore of taking security are irrelevant (and in the security interest CSAs are disapplied: See Section {{{{{1}}}|1(b)}}.

Probably not guarantees

Possibly it could include guarantees, too, though these tend to live their own separate lives as Credit Support Documents, and are not “delivered” under a CSA.