Equivalent Credit Support - CSA Provision: Difference between revisions

You may come across a couple of instances (in {{tag|OTC Clearing}}/{{tag|CCP}} space) where the {{tag|CSA}} definition of “{{csaprov|Equivalent Credit Support}}” has been modified to capture not just [[fungible]] securities of the same Series/[[ISIN]], but “similar ones” – same issuer but different maturity, and under a different ISIN etc. This is likely to have arisen by way of misapprehension fromthat “{{csaprov|Equivalent Credit Support}}” is already intended to allow redelivery of ''non''-[[fungible]] securities of a similar type, and the modification is only clarificatory. The [[Broker-dealer|broker’s]] funding desk may say, “yeah but what if there’s some illiquidity in the market?” but — well, friend, you have that exact risk across your entire ISDA book, so you’re already long that risk. In practice, if there is a market disruption and you can’t get hold of the necessary collateral, as long as it isn’t coterminous with your own credit deterioration, you should be able to hash it out.

Once so explained the funding team generally settles down.

Now there may be a need for the “''similar'' securities” concept in the [[OTC to CCP]] space, doubtful, but let’s say — but we should call it something else – perhaps “Similar Credit Support” – to differentiate it from “{{csaprov|Equivalent Credit Support}}” which is still needed in the CSA to support the title transfer analysis.