27.5 - GMSLA Provision
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2010 Global Master Securities Lending Agreement
Clause 27.5 in a Nutshell™ Use at your own risk, campers!
Full text of Clause 27.5
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Summary
Classic over-communication from ISLA’s crack drafting squad™. Nothing in the 2010 GMSLA says you can’t use a third party vendor,[1] and there are no confidentiality provisions, so plainly, this clause is not needed.
“But it won’t hurt to include it”, ISLA’s crack drafting squad™ must have thought.
Nor will painting a live camel with lentil soup.
But what it might do is cause confusion, angst, and alarm among the legal eagles staffing the negotiation, which in itself might prolong your agony for months. I am not just saying that. We know of one negotiation where the last outstanding point — for eight months, apparently — was “can we add a requirement for the mutual consent of both parties before anyone appoints a third party vendor?”
Sigh. In this day and age, third party vendors (the likes of MarkIt, Equilend, Thompson Reuters and so on) are a baked-in feature of the stock loan market. This is a bit like requiring consent from your car vendor before taking it to a service station for petrol.
ISLA’s crack drafting squad™ might think on this from a behavioural economics perspective: If this clause did not exist, no-one would imagine it needed limiting: it doesn’t say anywhere that you can’t use a third party vendor if that’s what you want to do, and, in the world of commerce, provided you don’t transgress your positive contractual obligations, you are free to do as you please. But, by saying it, you ask a silly question and invite a silly answer. Few assiduous attorneys will pass up the free opportunity to give one of those.
A third party vendor?
Note the rather clangorous dissonance between the party’s permission to appoint “a” third-party vendor top process its loans, and its approval to share relevant data with such vendors. A grammatical clanger from the ’squad, to be sure, but it somewhat undermines the scope for That Guy to raise the point in negotiations, or some subsequent squabble, that in permitting the parties to appoint one vendor this impliedly forbids them from appointing more than one.