Single Agreement - Pledge GMSLA Provision
2018 Global Master Securities Lending Agreement (Pledge Version)
Clause 17 in a Nutshell™
Use at your own risk, campers!
Full text of Clause 17
Related agreements and comparisons
Content and comparisons
The same, but for a rather pernickety reference to “related agreements”.
“But pernickety,” says the JC.
The “single agreement” concept
Here several pieces of magic come together to create the capital foundation of the modern master trading agreement. The challenge, originally solved by the First Men, was to create an architecture that allowed discrete, unitary, complete Transactions, such that creating a new one or terminating an old one didn’t upset the economic or legal integrity of other Transactions that were currently on foot, while at the same time creating an umbrella framework so that, should something regrettable happen to either party, all Transactions can be quickly rounded up, evaluated, stopped and then collapsed down — “netted” — to a single amount, payable by one party to the other.
This involved some canny financial engineering. The general rules of set-off require not just a mutuality of parties to the off-setting debts, but also amounts falling due on the same day and in the same currency — neither of which was necessarily true of the independent Transactions executed under an multi-currency, cross-border ISDA Master Agreement.
The answer was this concept of the “Single Agreement”: the over-arching agreement that, however independent and self-contained Transactions are for any other purpose, when it comes to their early termination they transmogrify themselves into the single host agreement, and are reduced to calculation inputs to the final amount which one party must pay the other. Thereby the process is not one of “set-off” at all, but of calculating a single net amount, payment of which would sort out all matters outstanding under the relationship.
Under the GMSLA specifically
Interestingly ICMA’s crack drafting squad™ elected not to use the expression “single agreement”, so beloved of ISDA’s crack drafting squad™ and the ninjas of the eye-ess-dee-aye that is has more or less become a term of art.
Why so? We may never know. But the point is purely to defeat the mendacious designs of insolvency administrators in far flung locales who may take it into their heads to pick apart valuable Loan exposures in their estate’s favour. That is to say — is that the dramatic look gopher I hear? — to be a cherry-picker.