Business Day - GMSLA Provision

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2010 Global Master Securities Lending Agreement
A Jolly Contrarian owner’s manual

Clause Business Day in a Nutshell
Use at your own risk, campers!

Business Day means a weekday on which banks and markets are generally open:

(a) For Delivery: where the Securities, Collateral and their Equivalents are to be delivered;
(b) For payments: in the principal financial centre for the relevant currency and where any relevant account designated in the Agreement is situated (or for euro, a day when TARGET operates);
(c) For notices: where the notice is due to be delivered (per Schedule paragraph 3); and
(d) Any other case: in each place stated in Schedule paragraph 6;

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Clause Business Day in full

Business Day means:

(a) in relation to Delivery in respect of any Loan, a day other than a Saturday or a Sunday on which banks and securities markets are open for business generally in the place(s) where the relevant Securities, Equivalent Securities, Collateral or Equivalent Collateral are to be delivered;
(b) in relation to any payments under this Agreement, a day other than a Saturday or a Sunday on which banks are open for business generally in the principal financial centre of the country of which the currency in which the payment is denominated is the official currency and, if different, in the place where any account designated by the Parties for the making or receipt of the payment is situated (or, in the case of a payment in euro, a day on which TARGET operates);
(c) in relation to a notice or other communication served under this Agreement, any day other than a Saturday or a Sunday on which banks are open for business generally in the place designated for delivery in accordance with paragraph 3 of the Schedule; and
(d) in any other case, a day other than a Saturday or a Sunday on which banks are open for business generally in each place stated in paragraph 6 of the Schedule;

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Related agreements and comparisons

Related agreements: Click here for the same clause in the 2018 Pledge GMSLA
Comparison: Click to compare the 2010 GMSLA and 2018 Pledge GMSLA versions of this clause.

Resources and navigation

2010 GMSLA: Full wikitext · Nutshell wikitext | GMLSA legal code
Pledge GMSLA: Hard copy (ISLA) · Full wikitext · Nutshell wikitext |
1995 OSLA: Full wikitext · Nutshell wikitext | GMSLA Netting
Let me Google that for you: Guide to equity finance | ISLA’s guide to securities lending for regulators and policy makers
Navigation
2010 GMSLA 1 · 2 · 3 · 4 · 5 · 6 · 7 · 8 · 9 · 10 · 11 · 12 · 13 · 14 · 15 · 16 · 17 · 18 · 19 · 20 · 21 · 22 · 23 · 24 · 25 · 26 · 27 · Schedule · Agency Annex · Addendum for Pooled Principal Agency Loans
2018 Pledge GMSLA 1 · 2 · 3 · 4 · 5 · 6 · 7 · 8 · 9 · 10 · 11 · 12 · 13 · 14 · 15 · 16 · 17 · 18 · 19 · 20 · 21 · 22 · 23 · 24 · 25 · 26 · 27 · 28 · Schedule · Agency Annex

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Content and comparisons

Tiny changes, probably not necessary if truth be told, though an improvement from a drafting perspective to restrict reference to delivery of Securities rather than the more cumbersome “Securities, Collateral, Equivalent Securities or Equivalent Collateral”. Otherwise little difference between Business Day in the 2010 GMSLA and Business Day in the 2018 Pledge GMSLA.
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Summary

The many gorgeous, multi-hued variations on the business day can be enjoyed as follows:

Spoiler: the ISDA one is, by far, the best.
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General discussion

About business day conventions

How one adjusts the calculation period for a given interest period to account for the fact that it ends on a non-working day, and that therefore the interest payment can’t be made on schedule.

There are two things you might wish to adjust here: one is settlement date for the interest payment — that is, the day on which the interest payment is actually made, the other is the duration of the interest period — that is the day on which the interest period in question is deemed to end.[1]

Unlike day count fractions, business day conventions are not applied in a standardised way across the industry: they are not tied to specific currencies or anything like that: it comes down to the basic preference of the institution calculating the interest rate.

That said, fixed rate products are a lot less bother than floating rate products, and tend to be unadjusted.

  • Fixed rate products - yeah whatever: Folks tend to be fairly sanguine about interest payments for fixed rate interest products, since nothing really hangs on when a period begins or ends (you make it up over the life of the product: if this period is thirty one days, the next one will be twenty nine, and the present value of the difference between getting a payment now for 31 days and a payment in a month for 29 days, and just getting two payments for 30 days each. You can’t pay your interest payment on a non-work day, so just pay it on the next business day, but the calculation period runs to the originally scheduled day. You lose a day or two’s interest on the interest, but you’ll make that up next time.
  • Floating rate products - hold on tiger: Floating rate products are a bit more nuanced because there is some path dependency here. The end of an interest calculation period determines not just the point at which you pay interest (and perhaps the number of days for which you pay it), but also the time at which you set the interest rate for the following period. Since interest rates are — or, at least, in the good old days were — volatile, the product is path dependent and a matter of a couple of days can make a difference to the overall amount of interest paid for the life of the product. Butterfly wings flapping in Amazon rainforests and all that.

Business day conventions for your reading pleasure

End of month - no adjustment business day convention: All cashflows are assumed to be distributed on the final day of the month (even if it is not a workday).
End of month - previous business day convention: All cashflows are assumed to be distributed on the final day of the month unless it is not a workday, in which case it’s the previous business day.
End of month - following business day convention: All cashflows are assumed to be distributed on the final day of the month unless it is not a workday, in which case it’s the next business day.

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See also

Template:M sa GMSLA Business Day
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References

  1. Which, to state the bleeding obvious, is also the date by reference to which the next period starts.