Template:M comp disc 2000 GMSLA Market Value

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Interesting, and not entirely welcome, development in the technology from the 2000 GMSLA, which provided that where any instrument was suspended its value would be nil, unless otherwise agreed.

In the 2010 GMSLA we are stuck with an elaborate and largely pointless waterfall — if the instrument is suspended you aren’t gong to get a price from an information service or a market-maker, and leaving everything in the hands of Lenders who may not have a clue (in the a case of principal Lenders under agent lending arrangements) may well be inclined to purport to have no instructions from a principal who has no clue (in the case of agent lenders themselves) and in any case may be firmly axed to pretend they don’t have a clue even if they do have one, where the Loaned Security is the one that has been suspended).

The 2000 GMSLA definition of Market Value set the value of “suspended” instruments — at least for Collateral valuation purposes — at nil, which seems harsh, but really isn’t, if there is no way of trading the instrument. In that case the innocent party (i.e., the other one) will want either a ton more collateral (if it is Lender) or all of its Collateral back if it is Borrower).