Market terminology - GMSLA Provision

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In a Nutshell Clause 2.3:

2.3 Market terminology
Even though we say “borrow”, “lend”, “Collateral”, “Margin” etc. as participants do in the market, Securities “borrowed” or “lent” and “Collateral” provided under this Agreement pass by outright title transfer.
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2010 GMSLA full text of Clause 2.3:

2.3 Market terminology
Notwithstanding the use of expressions such as “borrow”, “lend”, “Collateral”, “Margin” etc. which are used to reflect terminology used in the market for transactions of the kind provided for in this Agreement, title to Securities “borrowed” or “lent” and “Collateral” provided in accordance with this Agreement shall pass from one Party to another as provided for in this Agreement, the Party obtaining such title being obliged to deliver Equivalent Securities or Equivalent Collateral as the case may be.
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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

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A point of great confusion in the market, given the unhelpful title of the agreement.

But there is no lending done under a 2010 GMSLA: A “stock loan” contract comprises of an outright sale, by full title transfer, of a stock, against a corresponding outright sale, by full title transfer, of collateral, and a right in the future to enter into opposing transactions, also outright sales by full title transfer, of equivalent securities and collateral.

Beware: “equivalent” has a special meaning: “not more or less the same” or “broadly similar” but “the exact same thing, from the same ISIN”. Like, fungible.

For the purposes of this commentary, however, the learning is this: moment you are delivered your security under a stock loan it is yours, to do with as you please, against all the world. As the article on stock loan explains, you will almost certainly want to sell it, immediately. Then you will be short.

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