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| {{gmslasnap|1.1}} | | {{manual|MSG|2010|1|Clause|1|medium}} |
| {{gmsla2000snap|1.1}}
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| ====Commentary====
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| Note the "theory" of the trade here, notwithstanding the term "loan":
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| As mentioned, like the [[Repo]] a [[GMSLA]] transaction works as simultaneous agreements:
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| # by {{gmslaprov|Lender}} to sell securities to {{gmslaprov|Borrower}} against the sale by {{gmslaprov|Borrower}} of {{gmslaprov|Collateral}} (or payment of cash) to {{gmslaprov|Lender}}, and
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| # by {{gmslaprov|Borrower}} to sell to equivalent securities back to {{gmslaprov|Lender}} against the sale by {{gmslaprov|Lender}} to {{gmslaprov|Borrower}} of {{gmslaprov|Collateral}} (or payment of cash) 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.
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| Therefore if 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/liability is the net MTM 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}}.
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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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| {{gmslaanatomy}}
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