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There is a world of difference between [[rehypothecation]] and [[agent lending]], even though {{tag|UCITS V}} threatens (vaguely) to regard them as [[22(7) - UCITS V Provision|different varieties of the same thing]]. | There is a world of difference between [[rehypothecation]] and [[agent lending]], even though {{tag|UCITS V}} threatens (vaguely) to regard them as [[22(7) - UCITS V Provision|different varieties of the same thing]]. | ||
===Where you DO see a right of [[rehypothecation]]=== | |||
===Where you DO see a right of rehypothecation=== | |||
====Prime brokerage arrangements==== | ====Prime brokerage arrangements==== | ||
In a {{tag|prime brokerage}} arrangement, the [[prime broker]] has financed the purchase of a client’s asset, and it holds that asset in [[custody]], with {{tag|security}} over it as surety for repayment of the amount it lent the client to buy it in the first place. As [[custodian]], the [[prime broker]] has legal title but not [[beneficial interest]] in the asset. So it is rather as if the client had “pledged” the asset under a [[New York law]] {{t|CSA}} to the [[prime broker]]. therefore the term rehypothecation, to describe the process whereby the [[prime broker]] takes that asset and sells it to defray the cost of financing it, with a [[contingent obligation]] to redeliver something identical back on request, is not an outrageous distortion of the facts of what is happening. | In a {{tag|prime brokerage}} arrangement, the [[prime broker]] has financed the purchase of a client’s asset, and it holds that asset in [[custody]], with {{tag|security}} over it as surety for repayment of the amount it lent the client to buy it in the first place. As [[custodian]], the [[prime broker]] has legal title but not [[beneficial interest]] in the asset. So it is rather as if the client had “pledged” the asset under a [[New York law]] {{t|CSA}} to the [[prime broker]]. therefore the term rehypothecation, to describe the process whereby the [[prime broker]] takes that asset and sells it to defray the cost of financing it, with a [[contingent obligation]] to redeliver something identical back on request, is not an outrageous distortion of the facts of what is happening. | ||
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====US market-standard {{msla}}==== | ====US market-standard {{msla}}==== | ||
The collateral leg of a {{msla}} is a pledge which generally has a right of rehypothecation, allowing the collateral holder to reuse the collateral in the market. Like the {{nyvmcsa}} this | The collateral leg of a {{msla}} is a pledge which generally has a right of rehypothecation, allowing the collateral holder to reuse the collateral in the market. Like the {{nyvmcsa}} this entirely defeats the point of creating a pledge structure, but who are we, with our decidedly movable force of namby-pamby ''logic'', to quibble with the quite irresistible force of the US market practice? | ||
===Where you ''don’t'' see it=== | ===Where you ''don’t'' see it=== | ||
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*[[Rehypothecation]] | *[[Rehypothecation]] | ||
*Art {{ucits5prov|22(7)}} {{t|UCITS V}} | *Art {{ucits5prov|22(7)}} {{t|UCITS V}} | ||
{{ref}} | {{ref}} |