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Template:Csa title transfer vs pledge: Difference between revisions
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Template:Csa title transfer vs pledge (view source)
Revision as of 18:58, 17 January 2020
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====Title transfer under a {{ukcsa}}==== | ====Title transfer under a {{ukcsa}}==== | ||
Under a “{{ttca}}” when a party provides collateral it transfers it to the other party outright and absolutely: it ''gives'' it, free of all reversionary interests, to the {{{{{1}}}prov|Transferee}}. | Under a “{{ttca}}” when a party provides collateral it transfers it to the other party outright and absolutely: it ''gives'' it, free of all reversionary interests, to the {{{{{1}}}prov|Transferee}}. | ||
*Securities delivered to Transferee become the {{{{{1}}}prov|Transferee}}’s property absolutely | *Securities delivered to {{{{{1}}}prov|Transferee}}become the {{{{{1}}}prov|Transferee}}’s property absolutely | ||
*{{{{{1}}}prov|Transferee}} does not hold them in custody for the {{{{{1}}}prov|Transferor}}; | *{{{{{1}}}prov|Transferee}} does not hold them in custody for the {{{{{1}}}prov|Transferor}}; | ||
*{{{{{1}}}prov|Transferee}} has only an obligation to redeliver an [[equivalent]] security. | *{{{{{1}}}prov|Transferee}} has only an obligation to redeliver an [[equivalent]] security. | ||
*Therefore no {{tag|CASS}} or [[custody]] question arises at any point - the {{{{{1}}}prov|Transferor}} gives up all legal claims to the asset. | *Therefore no {{tag|CASS}} or [[custody]] question arises at any point - the {{{{{1}}}prov|Transferor}} gives up all legal claims to the asset. | ||
*Nor does it make any sense to talk about the | *Nor does it make any sense to talk about the {{{{{1}}}prov|Transferee}}’s right to [[reuse]] or [[rehypothecate]] the asset. It owns the asset outright: by definition it can do what it wants with it; the {{{{{1}}}prov|Transferor}} can’t stop it.<ref>This doesn't stop [[triparty agent]]s requiring title transfer providers to grant their counterparties a right of reuse.</ref> | ||
====Pledge under a {{nycsa}} (and a {{csd}})==== | ====Pledge under a {{nycsa}} (and a {{csd}})==== | ||
Examples: The {{nycsa}}s and the {{csd}} are {{sfca}}s in that the {{nyvmcsaprov|Pledgor}} creates a [[security interest]] over the document in favour of the {{nyvmcsaprov|Secured Party}}, but retains beneficial ownership of the assets. | Examples: The {{nycsa}}s and the {{csd}} are {{sfca}}s in that the {{nyvmcsaprov|Pledgor}} creates a [[security interest]] over the document in favour of the {{nyvmcsaprov|Secured Party}}, but retains beneficial ownership of the assets. | ||
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''{{nycsa}}s are {{isdaprov|Credit Support Document}}s but are '''not''' {{isdaprov|Transaction}}s. | ''{{nycsa}}s are {{isdaprov|Credit Support Document}}s but are '''not''' {{isdaprov|Transaction}}s. | ||
Because ownership transfers absolutely, the {{{{{1}}}prov|Transferee}} doesn’t have to do anything to enforce its collateral. It already owns it outright. Indeed, to the contrary, should the Exposure that the collateral supports disappear, the Transferor will be the creditor of the Transferee. It is as it it were a {{isdaprov|Transaction}} under the ISDA where the mark-to-market exposure had flipped around. Indeed, a {{ukcsa}} '''is''' a “{{isdaprov|Transaction}}” under the {{isdama}} — it is an integral part of the {{isdama}} itself, and it is the proverbial schoolboy error to label a {{ukcsa}} as a “{{isdaprov|Credit Support Document}}”. It is not a Credit Support Document. | Because ownership transfers absolutely, the {{{{{1}}}prov|Transferee}} doesn’t have to do anything to enforce its collateral. It already owns it outright. Indeed, to the contrary, should the {{{{{1}}}prov|Exposure}} that the collateral supports disappear, the {{{{{1}}}prov|Transferor}}will be the creditor of the {{{{{1}}}prov|Transferee}}. It is as it it were a {{isdaprov|Transaction}} under the ISDA where the mark-to-market exposure had flipped around. Indeed, a {{ukcsa}} '''is''' a “{{isdaprov|Transaction}}” under the {{isdama}} — it is an integral part of the {{isdama}} itself, and it is the proverbial schoolboy error to label a {{ukcsa}} as a “{{isdaprov|Credit Support Document}}”. It is not a Credit Support Document. From the point of view of the ISDA architecture it is the {{isdaprov|Confirmation}} for a {{isdaprov|Transaction}}. | ||
But the {{nycsa}}s are ''not'' {{isdaprov|Transaction}}s, for the same reason: title ''doesn’t'' change hands. They are old fashioned security arrangements. Therefore they '''are'' Credit Support Documents in the labyrinthine logic of {{icds}}. This all no doubt must have seen an excellently complex thing for the little gnomes in {{icds}}when they were devising the idea of the [[CSA]] back in the early nineties. Nowadays, it just seems silly. But here we are, folks. | But the {{nycsa}}s are ''not'' {{isdaprov|Transaction}}s, for the same reason: title ''doesn’t'' change hands. They are old fashioned security arrangements. Therefore they '''are'' Credit Support Documents in the labyrinthine logic of {{icds}}. This all no doubt must have seen an excellently complex thing for the little gnomes in {{icds}}when they were devising the idea of the [[CSA]] back in the early nineties. Nowadays, it just seems silly. But here we are, folks. | ||