Deliveries through securities settlement systems generating automatic payments - GMSLA Provision
2010 Global Master Securities Lending Agreement
Clause 5.2 in a Nutshell™
Use at your own risk, campers!
Full text of Clause 5.2
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The 2018 Pledge GMSLA equivalent excises pretty much exactly the portion of this language that makes the least sense in the 2010 GMSLA version. Now this might be because the pledge structure means there is less call for substitutions of Equivalent Collateral — seeing as how the Borrower doesn’t give up title to the Collateral it provides in the first place — so these are details one does not need to get into, but we like to think it is because the original drafting is so dire no-one could understand it and in its wisdom the 2018 class of ISLA’s crack drafting squad™ decided to terminate the language with extreme prejudice instead.
If you have the first clue what this outrageous drafting is trying to achieve, then you deserve some kind of higher degree in syntactical parsing and we rather think you are a liar.
We have done our best to interpret in the nutshell clause. Our best guess is this didn’t really need to be said at all; this is some kind of mangled summation of the bleeding obvious; a tortured “goes without saying” clause that some poor sod in ISLA’s crack drafting squad™ talked herself, against the stout objections of her brothers and sisters in arms, into trying to articulate, and by the time she realised her quest was futile it was too late and she was committed. Sunk cost fallacy.
So: there are some securities lending settlement systems like Equilend, Pirum, Clearstream and Triana, which handle the busy job of matching and settling the tens of thousands of stock loan transactions that take place every day, saving the poor beleaguered operations staff on each side having to match and post collateral back and forth for new and outstanding loans.
Each party will set itself up with an account and a “long box” containing collateral it makes available to collateralise its loans, and the settlement system effects all the movements using the ineffable algorithmic magic of AI.
This wording really reflects that transfers made by these systems on the parties’ behalf count as discharging their obligations under the Loans — like, why wouldn’t they? — and that is about it.
But boy, did the ’squad get itself in a tangle trying to say this.
- Who are we kidding? long since made redundant operations staff, more like.