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| {{gmslaanat|1}} | | {{manual|MSG|2010|1|Clause|1|medium}} |
| Note the “theory” of the trade here, notwithstanding the term “{{gmslaprov|Loan}}”: Like a [[Repo]] a [[GMSLA]] {{gmslaprov|Loan}} works as simultaneous agreements to exchange {{gmslaprov|Securities}} and {{gmslaprov|Collateral}} by '''outright [[title transfer]]'''.
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| *'''At inception''': [[Title transfer]] by {{gmslaprov|Lender}} to {{gmslaprov|Borrower}} of securities against the [[title transfer]] by {{gmslaprov|Borrower}} to {{gmslaprov|Lender}} of {{gmslaprov|Collateral}};
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| *'''At termination''': [[Title transfer]] by {{gmslaprov|Borrower}} to {{gmslaprov|Lender}} of “{{gmslaprov|Equivalent}}” against the [[title transfer]] by {{gmslaprov|Lender}} to {{gmslaprov|Borrower}} of “{{gmslaprov|Equivalent}}” {{gmslaprov|Collateral}} at a later date.
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| That is to say that (despite the [[GMSLA]] name) there isn’t a “loan leg” and a “collateral leg” as such: each repo/stock loan is as an outright sale against a future obligation to do the reverse. This is not how the market practitioners generally see it and [[Mediocre lawyer|lawyers of a more officious disposition]] — yes, such creatures do exist —will have to forcibly restrain themselves from correcting their clients at the end of every sentence <ref>And where they cannot, their clients will have to forcibly restrain themselves from lamping their lawyers.</ref>.
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| Nonetheless, if a counterparty goes insolvent during a trade, the first part of the transaction is fully settled and the administrator is left with a single forward settling transaction under which it is entitled to receive, DVP, an asset against payment of cash or delivery of an asset.
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| The counterparty’s exposure is the net [[mark-to-market]] of that forward settling trade: where it is a {{gmslaprov|Borrower}} its exposure is the [[haircut]] owed by the {{gmslaprov|Lender}} back to it. Where it is a {{gmslaprov|Lender}} the liability is the [[haircut]] you owe back the {{gmslaprov|Borrower}}. More — much, much more on this topic where [[Pledge GMSLA]] is concerned.
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| This is helpful to the [[netting]] analysis, which therefore applies only between one stock loan transaction and another (and not within a single stock loan trade). The absence of a netting flag means you cannot offset positive MTMs where you are a {{gmslaprov|Lender}} versus negative [[MTM]]s where you are a {{gmslaprov|Borrower}}.
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| Note the effect that intraday margining has on this under Clause {{gmslaprov|5}} of the {{gmsla}}.
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| {{sa}}
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| *[[GMSLA netting]]
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| *[[Pledge GMSLA]]
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| {{ref}}
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