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Events of Default - GMSLA Provision: Difference between revisions
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====OSLA==== | ====OSLA==== | ||
By contrast in the [[Overseas Securities Lenders’ Agreement]], a failure to deliver | By contrast in the [[Overseas Securities Lenders’ Agreement]], a failure to deliver in not an {{gmslaprov|Event of Default}}: a failure to deliver securities to {{isdaprov|initiate}} a loan is no breach of agreement, and a failure to redeliver securities at the end of a loan to {{isdaprov|complete}} it allows the lender to [[buy in]] securities to cover the fail. | ||
====Failure to deliver Collatera==== | |||
Under both the {{gmslaprov|GMSLA}} and the {{gmslaprov|OSLA}}, a failure to deliver collateral is an {{gmslaprov|Event of Default}}. | Under both the {{gmslaprov|GMSLA}} and the {{gmslaprov|OSLA}}, a failure to deliver collateral is an {{gmslaprov|Event of Default}}. | ||
Delivery failures are a feature of the market | ====Delivery Failures==== | ||
Delivery failures are a feature of the market: deliveries frequently fail in the stock lending market - a 10% delivery failure rate is not uncommon, and it can be over 50% in emerging markets. They occur for a number of reasons: | |||
*Operational failure, such as a mismatch of instructions | *Operational failure, such as a mismatch of instructions | ||
*A lender may lose | *A lender may lose its expected supply (for example a custodian may expect to lend but the owner of the securities sells before the loan settles) | ||
*A third party may fail to deliver to the party expecting to deliver under the securities loan | *A third party may fail to deliver to the party expecting to deliver under the securities loan | ||
*Lack of availability of the securities to deliver, | *Lack of availability of the securities to deliver, for example, due to the shares going “special” | ||
*Exceptionally, due to lack of funds at the deliverer | *Exceptionally, due to lack of funds at the deliverer | ||
Making delivery failures an {{gmslaprov|Event of Default}} would put participants in a perpetual state of default for reasons not necessarily related to the solvency or creditworthiness of the "failing" counterparty. | |||
====The purpose of {{gmslaprov|Events of Default}}==== | ====The purpose of {{gmslaprov|Events of Default}}==== | ||