Requirements to effect Delivery - GMSLA Provision: Difference between revisions

The beating heart of the legal basis of the {{gmsla}}. Even though there’s all this chat about {{gmslaprov|Loan}}s, in fact these transactions are exchanges having all the economic characteristics of [[loan]]s — the {{gmslaprov|Lender}} retains all economic risk to the asset being “lent”, and the {{gmslaprov|Borrower}} takes none of it — legally speaking the means by which securities and Collateral move back and forth between parties to a stock loan is outright [[title transfer]]. Of course, the {{gmslaprov|Borrower}} ''could'' return the exact asset that it has borrowed, but it is not obliged to and, in most cases it won’t be able to: the very point of a [[stock loan]] is to “[[short sell]]” into the market the thing you have borrowed, but taken no market exposure to. As soon as you have done this it has gone for all money. You ''can’t'' get it back. What you ''can'' do is buy an identical one (the legal term is a “[[fungible]]” asset — an identical quantity of the same series, issuer and {{t|ISIN}} — and in [[stock lending]] lingo this is called an “[[equivalent]]” asset.