Deliveries through securities settlement systems generating automatic payments - Pledge GMSLA Provision

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2018 Global Master Securities Lending Agreement (Pledge Version)
A Jolly Contrarian owner’s manual™

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Clause 5.2 in a Nutshell
Use at your own risk, campers!

Template:Nutshell Pledge GMSLA 5.2 view template

Full text of Clause 5.2

5.2 Deliveries through securities settlement systems generating automatic payments: Unless otherwise agreed between the Parties, where any Securities or Equivalent Securities are transferred through a book entry transfer or settlement system which automatically generates a payment or Delivery, or obligation to pay or deliver, against the transfer of such Securities, then such automatically generated payment, Delivery or obligation shall be treated as a payment or Delivery by the transferee to the transferor, and except to the extent that it is applied to discharge an obligation of the transferee to effect payment or Delivery, the Party so treated as receiving such payment or Delivery shall cause to be made to the other Party for value the same day either, where such transfer is a payment, an irrevocable payment in the amount of such transfer or, where such transfer is a Delivery, an irrevocable Delivery of Securities (or other property, as the case may be) Equivalent to such property.
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Related agreements and comparisons

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

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Content and comparisons

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.


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[1] 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.

See also

Template:M sa Pledge GMSLA 5.2


  1. Who are we kidding? long since made redundant operations staff, more like.