Template:Csa title transfer vs pledge: Difference between revisions

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-==={{tag|Title transfer}} vs. {{tag|Pledge}}===
+===The big difference between {{nycsa}}s and {{ukcsa}}s: {{tag|title transfer}} and {{tag|pledge}}===
-This feels as good a time as any to raise the great subject of [[title transfer]] and [[pledge]]. In a {{nutshell}}:
+This feels as good a time as any to raise the great subject of [[title transfer]] and [[pledge]]. Under a {{nycsa}} one transfers {{nycsaprov|Credit Support}} by means of [[pledge]]. Under a {{ukcsa}} one transfers {{vmcsaprov|Credit Support}} by means to [[title transfer]].
-===='''Title Transfer'''====
-Outright transfer. Examples: The {{1995csa}} – outside the US, by far the most common type of {{csa}} – is a [[title transfer]] document: A vanilla {{gmsla}} or {{gmsla}} operates by title transfer.
+What is the difference? Well, in a {{nutshell}}:
-*When securities delivered to a party they become the recipient's property absolutely
+====Title transfer under a {{ukcsa}}====
-*Recipient does not hold them in custody for the transferor;
+Under a “{{ttca}}” when a party provides collateral it transfers it to the other party outright and absolutely: it ''gives'' it, free of all reversionary interests, to the {{{{{1}}}prov|Transferee}}.
-*Recipient has only an obligation to redeliver an [[equivalent]] security.
+*Securities delivered to Transferee become the {{{{{1}}}prov|Transferee}}’s property absolutely
-*Therefore no {{tag|CASS}} or [[custody]] question arises at any point - the transferor gives up all legal claims to the asset.
+*{{{{{1}}}prov|Transferee}} does not hold them in custody for the {{{{{1}}}prov|Transferor}};
-*Nor does it make any sense to talk about the transferee’s right to [[reuse]] or [[rehypothecate]] the asset. It owns the asset outright: by definition it can do what it wants with it; the transferor can’t stop it.<ref>This doesn't stop [[triparty agent]]s requiring title transfer providers to grant their counterparties a right of reuse.</ref>
+*{{{{{1}}}prov|Transferee}} has only an obligation to redeliver an [[equivalent]] security.
-===='''Pledge'''====
+*Therefore no {{tag|CASS}} or [[custody]] question arises at any point - the {{{{{1}}}prov|Transferor}} gives up all legal claims to the asset.
-Examples: The {{1995csd}} and {{1994csa}}  are “pledge” documents. Collateral deliveries under the US-style {{msla}} and {{mra}} are pledges (with a right of [[reuse]]).
+*Nor does it make any sense to talk about the transferee’s right to [[reuse]] or [[rehypothecate]] the asset. It owns the asset outright: by definition it can do what it wants with it; the {{{{{1}}}prov|Transferor}} can’t stop it.<ref>This doesn't stop [[triparty agent]]s requiring title transfer providers to grant their counterparties a right of reuse.</ref>
-*The transferor delivers the assets to the transferee to hold in [[custody]] for the transferor – the transferor retains title.
+====Pledge under a {{nycsa}} (and a {{csd}})====
-*Recipient holds the assets subject to a {{tag|security interest}} securing its payment obligation under the related transaction.
+Examples: The {{nycsa}}s and the {{csd}} are {{sfca}}s in that the {{nyvmcsaprov|Pledgor}} creates a [[security interest]] over the document in favour of the {{nyvmcsaprov|Secured Party}}, but retains beneficial ownership of the assets.
-*The custody arrangement only exists while recipient holds the security, not before.
+*The {{{{{1}}}prov|Pledgor}} delivers the assets to the {{nyvmcsaprov|Secured Party}} to hold in [[custody]], subject to the [[security interest]], for the {{{{{1}}}prov|Pledgor}}. The {{{{{1}}}prov|Pledgor}} retains title to the assets.
-**Under US iterations of this form (e.g. the {{1994csa}}) the pledgee may nonetheless be entitled to sell the pledged asset absolutely, under a process known as [[rehypothecation]]. Don’t laugh. [[Amwell J|We]] think this converts the pledge into a [[title transfer collateral arrangement]] — at least at the point of [[rehypothecation]].
+*{{{{{1}}}prov|Secured Party}} holds the assets subject to a {{tag|security interest}} securing its payment obligation under the related transaction.
+*The custody arrangement only exists while {{{{{1}}}prov|Secured Party}} holds the security, not before.
+**Under the {{nycsa}}s  the {{nyvmcsaprov|Secured Party}} may nonetheless be entitled to sell the pledged asset absolutely, under a process known as [[rehypothecation]]. Don’t laugh. The [[JC]] thinks this converts the pledge into a {{ttca}} — at least at the point of [[rehypothecation]]. If so, it makes you wonder why, you know, all the fuss with security interests.
+===“{{isdaprov|Transaction}}” versus “{{isdaprov|Credit Support Document}}” complicated affair.===
+''{{ukcsa}}s are {{isdaprov|Transaction}}s but are not {{isdaprov|Credit Support Document}}s.
+''{{nycsa}}s are {{isdaprov|Credit Support Document}}s but are '''not''' {{isdaprov|Transaction}}s.
+Because ownership transfers absolutely, the {{{{{1}}}prov|Transferee}} doesn’t have to do anything to enforce its collateral. It already owns it outright. Indeed, to the contrary, should the Exposure that the collateral supports disappear, the Transferor will be the creditor of the Transferee. It is as it it were a {{isdaprov|Transaction}} under the ISDA where the mark-to-market exposure had flipped around. Indeed, a {{ukcsa}} '''is''' a “{{isdaprov|Transaction}}” under the {{isdama}} — it is an integral part of the {{isdama}} itself, and it is the proverbial schoolboy error to label a {{ukcsa}} as a “{{isdaprov|Credit Support Document}}”. It is not a Credit Support Document. It is a Transaction.
+But the {{nycsa}}s are ''not'' {{isdaprov|Transaction}}s, for the same reason: title ''doesn’t'' change hands. They are old fashioned security arrangements. Therefore they '''are'' Credit Support Documents in the labyrinthine logic of {{icds}}. This all no doubt must have seen an excellently complex thing for the little gnomes in {{icds}}when they were devising the idea of the [[CSA]] back in the early nineties. Nowadays, it just seems silly. But here we are, folks.