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Borrower’s failure to deliver Equivalent Securities - GMSLA Provision: Difference between revisions
Borrower’s failure to deliver Equivalent Securities - GMSLA Provision (view source)
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{{gmslaanat|9.1}} | {{gmslaanat|9.1}} | ||
If the {{gmslaprov|Lender}} decides to terminate, you are into the realm of the fabled and famous {{gmslaprov|mini close-out}}, wherein the {{gmslaprov|Lender}} exercises rights to terminate and value the {{gmslaprov|Loan}} by itself ''as if it were'' an {{gmslaprov|Event of Default}}, whilst not ''actually'' being an {{gmslaprov|Event of Default}}. | If the {{gmslaprov|Lender}} decides to terminate, you are into the realm of the fabled and famous {{gmslaprov|mini close-out}}, wherein the {{gmslaprov|Lender}} exercises rights to terminate and value the {{gmslaprov|Loan}} by itself ''as if it were'' an {{gmslaprov|Event of Default}}, whilst not ''actually'' being an {{gmslaprov|Event of Default}}. | ||
This reflects the reality that settlement failures in the equities markets are common and, seeing as the whole point of a [[stock loan]] is to provide the {{Gmslaprov|borrower}} with a security it can [[sell short]], the {{gmslaprov|Borrower}} is likely to be relying on someone else settling the security into it before it can return the security to the {{gmslaprov|Lender}} — as such the borrower’s failure is not necessarily evidence that your {{gmslaprov|Borrower}} is about to auger into the side of a hill. | |||
The {{gmslaprov|Lender}} has a self-help mechanism it can use to close out its market risk: a {{gmslaprov|buy-in}}. | |||