Template:Gmsla 9 comp

Redlines

2010 ⇒ 2018: Redline of the 2010 GMSLA vs. the 2018 Pledge GMSLA: comparison (and in reverse)

Discussion

Paragraph 9 of the 2010 GMSLA is broadly the same in the 2018 Pledge GMSLA, only with no reference to failure by the Lender to return Equivalent Collateral — so there is no middle paragraph in the 2018 Pledge GMSLA addressing {{{{{1}}}|Lender’s failure to deliver Equivalent Collateral}}, essentially — all for the sensible reason that, under the 2018 Pledge GMSLA construct, the Lender never gets its mitts on the Collateral in the first place — it is locked away from it in a triparty pledge account — so the Lender is hardly in a position to fail to return it if there is a settlement fail — which there should not be because it is locked away from it in a triparty pledge account. Otherwise, the provision in the 2018 Pledge GMSLA works in the same way as the normal GMSLA.

This is because it only really applies to the {{{{{1}}}|Borrower}} on the “borrow” leg, and — assuming the {{{{{1}}}|Borrower}} has not gone tette in alto, but is merely struggling to source Equivalent Securities to return because the market’s a bit dickey — you would not expect the {{{{{1}}}|Lender}} to enforce on the {{{{{1}}}|Collateral}}.

Comparable master agreements

Repo

We are given to understand that neither the 2010 GMRA, its American cousin the 1995 MRA nor the American stock lending agreement the 2017 MSLA have comparable mini-close-out provisions, though it is understood as a matter of good form that where there has been a simple innocent settlement failure and one can safely buy in — thereby helping oneself — one would never be so vulgar or unsportspersonlike as to actually call an Event of Default. (In this regard, see the unnecessary fiddlings to definitions of Specified Transaction that ISDA credit officers might insist on to prevent repo and stock loan settlement failures triggering DUST or, god forbid — and generally God does forbid it, seeing as generally securities financing is not Specified Indebtedness — Cross Default to a third party altogether).

Equity derivatives

Fun comparison: the Equity Derivatives Definitions completely botch the equivalent settlement failure terms for equity swaps. What business you have physically settling synthetic equity swaps is a whole other question of course — so it doesn’t really matter — but for a spot of gratuitous bafflement, look no further than Consequences of Failure to Deliver under Section 12.9(b)(ii) of the Equity Derivatives Definitions.