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===A contrarian’s guide to closing out a {{gmsla}}=== | ===A contrarian’s guide to closing out a {{gmsla}}=== | ||
*'''There’s an Event of Default''': Note that (unlike the {{isdama}} an event only becomes an {{gmslaprov|Event of Default}} once the {{gmslaprov|Non-Defaulting Party}} has given notice of it with no need for the {{gmslaprov|Non-Defaulting Party}} to give a further notice: it has already given one (or not had to, if it’s an event triggering {{gmslaprov|Automatic Early Termination}}. Thus, at once: | *'''There’s an Event of Default''': Note that (unlike the {{isdama}} an event only becomes an {{gmslaprov|Event of Default}} once the {{gmslaprov|Non-Defaulting Party}} has given notice of it with no need for the {{gmslaprov|Non-Defaulting Party}} to give a further notice: it has already given one (or not had to, if it’s an event triggering {{gmslaprov|Automatic Early Termination}}. Thus, at once: | ||
*All payment and delivery obligations are accelerated, becoming due as of the date of the {{eqderivprov|Event of Default}}, which is therefore the Termination Date, although this is not the date on which the close-out is settled - bear with me. | **'''Acceleration''': All payment and delivery obligations are accelerated, becoming due as of the date of the {{eqderivprov|Event of Default}}, which is therefore the Termination Date, although this is not the date on which the close-out is settled - bear with me. | ||
*{{gmslaprov|Non-Defaulting Party}} determines the {{gmslaprov|Default Market Value}} | **'''{{gmslaprov|Default Market Value}}''': {{gmslaprov|Non-Defaulting Party}} determines the {{gmslaprov|Default Market Value}} for all non cash obligations. | ||
***'''When''': Even though this references the {{gmslaprov|Termination Date}} (being the date of default), it is determined as of the {{gmslaprov|Default Valuation Time}}, namely at close five dealing days ''after'' the date of the default (or for an {{gmslaprov|AET}}, the date the {{gmslaprov|NDP}} became aware of it). | |||
***'''What''': | |||
****Where the NDP has actually bought or sold securities or collateral, it can use the net sale proceeds to calculate the {{gmslaprov|Default Market Value}} for those assets. | |||
****Where it has not, it takes at least two [[dealer quotes]] — offer side for securities it is owed; bid side for those it owes — averages them, and adjusts them for unpaid coupons and transaction costs. | |||
****If it can't do either, it can take its own commercially reasonable estimate of their fair market value, accounting for transaction costs. | |||
*If it hasn't determined the Default Market Value |