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{{a|glossary|}}''Warning: metaphysical area approaching. Approach stacked turtles with care.''<br> | |||
{{quote|{{d|Equivalent|/ɪˈkwɪvələnt/|adj|}}<br> | |||
1. ''Finance'': In comparison to something else, ''exactly'' the same. [[Fungible]]. Interchangeable in every respect. If a [[security]], from the same series; having the same [[ISIN]]. Not just “broadly similar”. | |||
2. ''Colloquial'': One thing that is equal to or corresponds with another thing in value, amount, function, meaning, etc., ''without'' being exactly the same thing. | |||
"Banque de France is the French equivalent of the Bank of England". | |||
''Financial “equivalence” is not, er, equivalent, to colloquial “equivalence”.''}} | |||
It barely need being said, but let’s say it: this site is about financial stuff. When we talk about “equivalence”, we mean ''financial'' equivalence. This is a narrow, specialised meaning. When you get given something — [[credit support]], for example — that at some point you’ll have to give back, the deal is you have to give an ''identical'' thing back, in the sense of having not just the same issuer, same maturity date and ranking [[pari passu]] with what you were given in the first place, but actually being from the same series, with the same [[ISIN]]. For all purposes, the ''same''. | |||
Nowadays, where all securities are held in electronic book-entry form, or on a [[blockchain]] or something like that,<ref>Actually, maybe it ''does'' mean something on a [[blockchain]]: each entry in the legible is its own distinct thing, defiantly [[non-fungible]], [[ontologically]], even if it ''is'' fungible ''financially''. Odd.</ref> this doesn’t really mean a great deal, but in the old days, when securities were printed on paper, it did. The only securities commonly printed on paper these days are bank notes: One British five pound note is equivalent to another British five pound note, but is not equivalent to a Jersey five pound note, because even though Jersey is in a currency union with sterling, the Jersey note is not legal tender in England. | |||
{{equivalent vs identical}} | |||
Now, when it comes to return it, ''dilemma'': you’ve been mucking around with it. You don’t still ''have'' “it”. You could go and buy a ''new'' “it” and return that, but the ''exact old “it”'' they gave you — that’s goneski. | |||
Look: you got it by [[title transfer]], so it was yours to muck around with, wasn’t it? Or, look, so they only ''[[pledge]]d'' it to you, but you had the right to [[rehypothecate]] it, didn’t you? You were ''allowed'' to muck around with it.<ref>Or, just as commonly and more innocuously, you held it in a [[dematerialised]] [[omnibus]] [[custody account]], with [[fungible]] assets owned by other customers, and never did ''anything with it, but you ''still can’t tell whose bit is whose''.</ref> | |||
All true. And just so. In any case, you want to hand over something that is ''identical'' to, but isn’t exactly ''the'' something that you were given. But it is ''exactly'' the same. For most purposes in this day and age that is fine, and indeed will support your [[title transfer]] analysis, should you be in the market for a [[true sale opinion]]. | |||
When, as all of them these days are, your [[securities]] are [[dematerialised]] and held in a [[clearing system]], this might seem an arid distinction, but it is one you must keep in mind when considering the fundamentals of our business — [[close-out netting]], [[stock lending]], [[rehypothecation]] (anything that involves a [[title transfer collateral arrangement]], really) — lest the whole intellectual superstructure of modern [[credit risk mitigation]] should collapse before your eyes. Or ''on'' you. | |||
{{Equivalent vs similar}} | |||
{{sa}} | |||
*[[Fungible]] | |||
*{{gmsla}}: {{gmslaprov|Equivalent}}''<br> | |||
*{{gmra}}: {{gmraprov|Equivalent}}''<br> | |||
*“Heavier than air flight is impossible”. I mean, how is this 580 tonne aeroplane, which I am sitting in thirty thousand feet in the air, not falling out of the sky (and onto [[Chicken Licken]]’s head)? | *“Heavier than air flight is impossible”. I mean, how is this 580 tonne aeroplane, which I am sitting in thirty thousand feet in the air, not falling out of the sky (and onto [[Chicken Licken]]’s head)? | ||
*[[Title transfer collateral arrangement]] | *[[Title transfer collateral arrangement]] | ||
*[[Pledge]] | *[[Pledge]] | ||
{{ | {{c2|Securities Lending|Collateral}} | ||
{{ref}} | |||