Template:Csa exchanges: Difference between revisions
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'''Comparison note''': But for the tedious scattering of “VM” all over the place — and one different cross reference ({{csaprov|11(d)}} to {{vmcsaprov|11(e)}} where a customised {{{{{1}}}prov|Exchange Date}} might be defined), the {{vmcsa}} version is identical to the {{1995csa}} version. Because it was ''perfect'' first time. | '''Comparison note''': But for the tedious scattering of “VM” all over the place — and one different cross reference ({{csaprov|11(d)}} to {{vmcsaprov|11(e)}} where a customised {{{{{1}}}prov|Exchange Date}} might be defined), the {{vmcsa}} version is identical to the {{1995csa}} version. Because it was ''perfect'' first time. | ||
Note here the {{{{{1}}}prov|Transferor}} can ask for an exchange, but the {{{{{1}}}prov|Transferee}} is not obliged to accept it. This is a fundamental provision of “title transfer”: once the {{{{{1}}}prov|Eligible Credit Support}} is delivered under a [[title-transfer]] {{csa}}, the {{{{{1}}}prov|Transferee}} owns it absolutely. It only has to return {{{{{1}}}prov|Equivalent Credit Support}}. This is a special, [[ISDA ninja|legal ninja]]<ref>Oh, all right, and [[GMSLA ninja]], [[Repo ninja]] and other kinds of [[ninja]]s too.</ref> use of the word “[[equivalent]]”. It means “[[fungible]]”; ''exactly the same as ~''; not “broadly similar to ~”. | Note here the {{{{{1}}}prov|Transferor}} can ask for an exchange, but the {{{{{1}}}prov|Transferee}} is not obliged to accept it. This is a fundamental provision of “title transfer”: once the {{{{{1}}}prov|Eligible Credit Support}} is delivered under a [[title-transfer]] {{csa}}, the {{{{{1}}}prov|Transferee}} owns it absolutely. It only has to return {{{{{1}}}prov|Equivalent Credit Support}}. This is a special, [[ISDA ninja|legal ninja]]<ref>Oh, all right, and [[GMSLA]] [[ninja]], [[Repo]] [[ninja]] and other kinds of [[ninja]]s too.</ref> use of the word “[[equivalent]]”. It means “[[fungible]]”; ''exactly the same as ~''; not “broadly similar to ~”. | ||
This is important also from a pricing (and operational) perspective: otherwise the {{{{{1}}}prov|Transferor}} would have a “worst-of” [[option]] and would be entitled to continually switch into the "cheapest to deliver" of the {{{{{1}}}prov|Eligible Credit Support}}. Needless to say, the increased collateral flows would also increase the operational burden. | This is important also from a pricing (and operational) perspective: otherwise the {{{{{1}}}prov|Transferor}} would have a “worst-of” [[option]] and would be entitled to continually switch into the "cheapest to deliver" of the {{{{{1}}}prov|Eligible Credit Support}}. Needless to say, the increased collateral flows would also increase the operational burden. | ||
Revision as of 10:09, 24 May 2021
Comparison note: But for the tedious scattering of “VM” all over the place — and one different cross reference (11(d) to 11(e) where a customised {{{{{1}}}prov|Exchange Date}} might be defined), the 2016 VM CSA version is identical to the 1995 CSA version. Because it was perfect first time.
Note here the {{{{{1}}}prov|Transferor}} can ask for an exchange, but the {{{{{1}}}prov|Transferee}} is not obliged to accept it. This is a fundamental provision of “title transfer”: once the {{{{{1}}}prov|Eligible Credit Support}} is delivered under a title-transfer 1995 CSA, the {{{{{1}}}prov|Transferee}} owns it absolutely. It only has to return {{{{{1}}}prov|Equivalent Credit Support}}. This is a special, legal ninja[1] use of the word “equivalent”. It means “fungible”; exactly the same as ~; not “broadly similar to ~”.
This is important also from a pricing (and operational) perspective: otherwise the {{{{{1}}}prov|Transferor}} would have a “worst-of” option and would be entitled to continually switch into the "cheapest to deliver" of the {{{{{1}}}prov|Eligible Credit Support}}. Needless to say, the increased collateral flows would also increase the operational burden.
{{{{{1}}}prov|Delivery Amount}}s: Contrast this with {{{{{1}}}prov|Delivery Amounts}}, where a {{{{{1}}}prov|Transferor}} has the option to deliver the cheapest of the {{{{{1}}}prov|Eligible Credit Support}} specified in the 1995 CSA.
{{{{{1}}}prov|Return Amount}}s: A {{{{{1}}}prov|Transferee}} does have a (limited) option in terms of selecting the {{{{{1}}}prov|Return Amount}} should there be a requirement to return posted credit support: it can select the cheapest to deliver of all the {{{{{1}}}prov|Eligible Credit Support}} that has been posted to it which currently comprises its {{{{{1}}}prov|Credit Support Balance}}.