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Template:Delivery failures under GMSLA: Difference between revisions
Template:Delivery failures under GMSLA (view source)
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===Failures to ''deliver'' are not {{gmslaprov|Events of Default}}=== | ===Failures to ''deliver'' are not {{gmslaprov|Events of Default}}=== | ||
{{gmslaprov|Failures to deliver}} {{gmslaprov|Securities}} under a {{gmsla}} are not {{gmslaprov|Events of Default}} because failure to deliver securities to initiate a {{gmslaprov|Loan}} is not a breach of agreement, and if a {{gmslaprov|Borrower}} fails to redeliver {{gmslaprov|Equivalent}} {{gmslaprov|Securities}} at the end of a {{gmslaprov|Loan}}, the {{gmslaprov|Lender}} may [[buy in]] {{gmslaprov|Securities}} to cover the fail, and may execute a [[mini close-out]], but that is not an {{ | {{gmslaprov|Failures to deliver}} {{gmslaprov|Securities}} under a {{gmsla}} are not {{gmslaprov|Events of Default}} because failure to deliver securities to initiate a {{gmslaprov|Loan}} is not a breach of agreement, and if a {{gmslaprov|Borrower}} fails to redeliver {{gmslaprov|Equivalent}} {{gmslaprov|Securities}} at the end of a {{gmslaprov|Loan}}, the {{gmslaprov|Lender}} may [[buy in]] {{gmslaprov|Securities}} to cover the fail, and may execute a [[mini close-out]], but that is not an {{gmslaprov|Event of Default}} either. | ||
But a failure to deliver {{ | But a failure to deliver {{gmslaprov|Collateral}} at inception or to redeliver {{gmslaprov|Equivalent}} {{gmslaprov|Collateral}} on termination '''is''' an {{gmslaprov|Event of Default}}. | ||
Deliveries frequently fail in the stock lending market for many reasons: | Deliveries frequently fail in the stock lending market for many reasons: | ||
*Operational failures, such as a mismatch of instructions; | *Operational failures, such as a mismatch of instructions; | ||
*A {{ | *A {{gmslaprov|Lender}} may lose its expected supply (for example a rehypothecating [[prime broker]] intending to [[rehypothecate]] client’s securities where the client recalls and sells the securities sells before the {{gmslaprov|Loan}} settles) | ||
*A market counterparty may fail against the party expecting to deliver under the {{ | *A market counterparty may fail against the party expecting to deliver under the {{gmslaprov|Loan}} | ||
*Market events may cause a lack of liquidity — for example if the shares go “special” | *Market events may cause a lack of liquidity — for example if the shares go “special” | ||