Substitutions of Collateral - GMSLA Provision

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2010 Global Master Securities Lending Agreement
A Jolly Contrarian owner’s manual

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Stock Loan owner’s manuals: 2010 GMSLA · 2000 GMSLA · Pledge GMSLA · OSLA

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GMSLA

Clause 5.3 in a Nutshell
Use at your own risk, campers!

5.3 Substitutions of Collateral
Borrower may substitute any Collateral it has posted with Alternative Collateral that is acceptable to Lender long as it delivers the Alternative Collateral first, and otherwise meets the Required Collateral Value requirement at all times.
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Full text of Clause 5.3

5.3 Substitutions of Collateral
Borrower may from time to time call for the repayment of Cash Collateral or the Delivery of Collateral equivalent to any Collateral delivered to Lender prior to the date on which the same would otherwise have been repayable or deliverable provided that at or prior to the time of such repayment or Delivery Borrower shall have delivered Alternative Collateral acceptable to Lender and Borrower is in compliance with paragraph 5.4 or paragraph 5.5, as applicable.
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Related agreements and comparisons

Related agreements: Click here for the same clause in the 2018 Pledge GMSLA
Related agreements: Click here for the same clause in the 1995 OSLA
Comparison: Template:Gmsladiff 5.3
Comparison: Template:Osladiff 5.3

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Content and comparisons

The 2018 Pledge GMSLA does not have an equivalent provision. This is not for any reason that timidity — counsel drafting it (who shall remain nameless but once upon a time there was a bit of nominative determinism for those inclined to guess) thought it was a bit hard to deal with the security issues relating to substitution, so they just didn’t.

Stuff and nonsense, we at the JC say.
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Summary

Unlike the 1995 English Law CSA, a Borrower under the 2010 GMSLA can require a Lender to switch Collateral posted to it with Alternative Collateral (provided it is acceptable to the Lender, which it will be if it meets the definition of Collateral and is listed in Schedule 1).

By contrast, under Paragraph 3(c) of the CSA, a switch of posted Collateral requires the consent of the holding party (see 3(c)(ii)). The FOA Exchange-Traded Derivatives Agreement is similar to the ISDA CSA.
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See also

Template:M sa GMSLA 5.3
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References