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Template:Comparison between LOSB and ICOSB: Difference between revisions
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Template:Comparison between LOSB and ICOSB (view source)
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===Comparison of {{eqderivprov|LOSB}} and {{eqderivprov|Increased Cost of Stock Borrow}}=== | ===Comparison of {{eqderivprov|LOSB}} and {{eqderivprov|Increased Cost of Stock Borrow}}=== | ||
Compare and contrast {{eqderivprov|Loss of Stock Borrow}} with {{eqderivprov|Increased Cost of Stock Borrow}}. There is a logical hand-off and interaction between the two: | Compare and contrast {{eqderivprov|Loss of Stock Borrow}} with {{eqderivprov|Increased Cost of Stock Borrow}}. There is a logical hand-off and interaction between the two: | ||
*Under a {{eqderivprov|Loss of Stock Borrow}} the {{eqderivprov|Non-Hedging Party}} has a bit less flexibility in what it does: it must pony up (or procure) a [[stock borrow]] within 2 {{eqderivprov|Scheduled Trading Days}} itself, or {{eqderivprov|Hedging Party}} can terminate outright. Under {{eqderivprov|Increased Cost of Stock Borrow}}, the worst that can happen is the trade is repriced to take in the higher rate. So {{eqderivprov|ICOSB}} is the "gentler" provision from the {{eqderivprov|Non-Hedging Party}}’s perspective. | |||
*If the cost of a stock borrow exceeds the {{eqderivprov|Maximum Stock Loan Rate}} it is deemed to be (as good as) impossible to borrow stock, so it is treated as a {{eqderivprov|Loss of Stock Borrow}}, not merely an {{eqderivprov|Increased Cost of Stock Borrow}}. | *If the cost of a stock borrow exceeds the {{eqderivprov|Maximum Stock Loan Rate}} it is deemed to be (as good as) impossible to borrow stock, so it is treated as a {{eqderivprov|Loss of Stock Borrow}}, not merely an {{eqderivprov|Increased Cost of Stock Borrow}}. | ||
*If a counterparty wants to apply {{eqderivprov|Increased Cost of Stock Borrow}} ''whatever the cost of an available bid'' — and given that it can pass the cost on, a [[Synthetic prime brokerage - PB Provision|synthetic prime broker]] might be happy to do this — the answer is to disapply {{eqderivprov|Maximum Stock Loan Rate}} altogether. This means that ''any'' possible stock borrow rate, however astronomical, comes under {{eqderivprov|Increased Cost of Stock Borrow}}, and {{eqderivprov|Loss of Stock Borrow}} (which is slightly more onerous a termination right) only applies where there are no offers in the market at all. <br> | *If a counterparty wants to apply {{eqderivprov|Increased Cost of Stock Borrow}} ''whatever the cost of an available bid'' — and given that it can pass the cost on, a [[Synthetic prime brokerage - PB Provision|synthetic prime broker]] might be happy to do this — the answer is to disapply {{eqderivprov|Maximum Stock Loan Rate}} altogether. This means that ''any'' possible stock borrow rate, however astronomical, comes under {{eqderivprov|Increased Cost of Stock Borrow}}, and {{eqderivprov|Loss of Stock Borrow}} (which is slightly more onerous a termination right) only applies where there are no offers in the market at all. <br> | ||