Market terminology - GMSLA Provision
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2010 Global Master Securities Lending Agreement
Clause 2.3 in a Nutshell™ Use at your own risk, campers!
Full text of Clause 2.3
Related agreements and comparisons
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Content and comparisons
Template:M comp disc GMSLA 2.3
Summary
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.