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Amwelladmin (talk | contribs) (Created page with "The world is moving towards a predilection for cash only, single currency {{csaprov|CSA}}s, so this objection might soon seem archaic, but note a whopping great hole in the {{...") |
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===Ineligible {{csaprov|Credit Support}}=== | |||
{{csaprov|Credit Support}} which has been delivered but has subsequently fallen out of eligibililty criteria (and any non-eligible {{csaprov|Distributions}} and {{csaprov|Interest Amounts}} received in respect of {{csaprov|Eligible Credit Support}}) remains part of the {{csaprov|Credit Support Balance}}, but is valued at zero. | |||
While the world is moving towards a predilection for cash only, single currency [[CSA]]s, so this objection might soon seem archaic, in the mean time note a whopping great hole in the {{tag|CSA}} documentation here. ''What happens to stuff which, when you posted, was {{csaprov|Eligible Credit Support}}, but after posting it ceases to be eligible? How do you get it back?'' | |||
On the face of it, it’s straightforward: | |||
{{quote|''the {{csaprov|Value}} of “any items that are comprised in a {{csaprov|Credit Support Balance}} and are not {{csaprov|Eligible Credit Support}} is zero.”'' | |||
:—Definition of {{csaprov|Value}}, {{tag|CSA}}}} | |||
So it doesn’t count to the {{csaprov|Credit Support Balance}}. But just because something has no “{{csaprov|Value}}” under your {{csaprov|CSA}} doesn’t mean it has no value at all. There’s no accounting for taste, after all. If the {{csaprov|Transferee}} doesn’t want it, it should give it back, right? | |||
''Sans doubte'', that’s what the boxwallahs at {{tag|ISDA}} had in mind. But — ''whoops'' — that’s not quite what they managed: The mechanism for getting your posted collateral back is to wait for the {{csaprov|Exposure}} to reduce, and then call back [[equivalent]] items to those you posted. But even the day your {{csaprov|Exposure}} goes to (or through) zero, you can call only back {{csaprov|Equivalent Credit Support}} with a {{csaprov|Value}} equal to your existing {{csaprov|Credit Support Balance}} - in the eyes of the {{tag|CSA}}, that is all you have posted. | |||
But the CSA has no eyes for your previously posted, now ineligible, collateral. It is blind to it: your ineligible collateral has a “{{csaprov|Value}}” of zero, the {{csaprov|Transferee}} discharge its {{csaprov|Return Amount}} obligation without giving any of the ineligible stuff back. It gets trapped in a kind of parallel universe, like the Nosferatu the unposted, it neither lives nor dies, but ceaselessly roams the afterlife, seeking true love and haunting the dreams of every [[Mediocre lawyer|negotiator]]. | But the CSA has no eyes for your previously posted, now ineligible, collateral. It is blind to it: your ineligible collateral has a “{{csaprov|Value}}” of zero, the {{csaprov|Transferee}} discharge its {{csaprov|Return Amount}} obligation without giving any of the ineligible stuff back. It gets trapped in a kind of parallel universe, like the Nosferatu the unposted, it neither lives nor dies, but ceaselessly roams the afterlife, seeking true love and haunting the dreams of every [[Mediocre lawyer|negotiator]]. | ||
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Most houses have long since crafted language to deal with this contingency. I say “crafted” but “congealed” is a better description: the standard formulations are a tedious clutter of masticated paragraphs that interrupt the elegant flow of your elections, impeding the flow like a tacky mess that accumulates around the nozzle of a ketchup dispenser. All you really need to say is this: | Most houses have long since crafted language to deal with this contingency. I say “crafted” but “congealed” is a better description: the standard formulations are a tedious clutter of masticated paragraphs that interrupt the elegant flow of your elections, impeding the flow like a tacky mess that accumulates around the nozzle of a ketchup dispenser. All you really need to say is this: | ||
{{ | {{quote|If at any time any item comprising a {{csaprov|Credit Support Balance}} ceases to be {{csaprov|Eligible Credit Support}} the {{csaprov|Transferee}} must transfer to the equivalent items of the same type, nominal value, description and amount to the {{csaprov|Transferor}} on the {{csaprov|Settlement Day}} following the demand by the {{csaprov|Transferor}}. }} | ||
If at any time any item comprising a {{csaprov|Credit Support Balance}} ceases to be {{csaprov|Eligible Credit Support}} the {{csaprov|Transferee}} must transfer to the equivalent items of the same type, nominal value, description and amount to the {{csaprov|Transferor}} on the {{csaprov|Settlement Day}} following the demand by the {{csaprov|Transferor}}. | |||
}} | |||
You | You don’t need to make this transfer conditional on the {{csaprov|Transferor}} ponying up replacement {{csaprov|Eligible Credit Support}} - [[Q.E.D.]] this stuff has no {{csaprov|Value}}, so his {{csaprov|Credit Support Balance}} will be suddenly in debit, and the {{csaprov|Transferee}} can call additional {{csaprov|Delivery Amount}} independently of the return of this item. | ||