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Template:M comp disc GMSLA 11: Difference between revisions
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There is little difference between the {{gmsla}} and the {{pgmsla}} versions of Consequences of an Event of Default, as you can see more easily in this {{diff|45189|45184}} of the nutshell versions. (There’s a comparison of the full provisions in the usual place in the panel). One thing you will notice is how utterly dismal is the drafting of the original provision. It was no small task to create nutshell versions — you can thank me later — but they boil down to not very much. | [[11 - GMSLA Provision|There]] is little difference between the {{gmsla}} and the {{pgmsla}} versions of Consequences of an Event of Default, as you can see more easily in this {{diff|45189|45184}} of the nutshell versions. (There’s a comparison of the full provisions in the usual place in the panel). One thing you will notice is how utterly dismal is the drafting of the original provision. It was no small task to create nutshell versions — you can thank me later — but they boil down to not very much. | ||
The differences that there are are significant, since the philosophical unpinning of what is going on is profoundly different, even if the commercial outcome is the same. Think VHS and Betamax. In a nutshell, under the {{pgmsla}}: | The differences that there are are significant, since the philosophical unpinning of what is going on is profoundly different, even if the commercial outcome is the same. Think VHS and Betamax. In a nutshell, under the {{pgmsla}}: | ||
*Only the {{pgmslaprov|Borrower}}’s redelivery payments are accelerated, since by the theory of the game, the {{pgmslaprov|Lender}} never gets possession of the collateral and is not therefore in a position ''to'' redeliver it. | *Only the {{pgmslaprov|Borrower}}’s redelivery payments are accelerated, since by the theory of the game, the {{pgmslaprov|Lender}} never gets possession of the collateral and is not therefore in a position ''to'' redeliver it. | ||
*There’s less fog and confusion because {{ | *There’s less fog and confusion because {{islacds}} in their wisdom removed {{gmslaprov|Letters of Credit}} as a form of eligible {{pgmslaprov|Collateral}} from the {{pgmsla}} | ||
*The reckoning of what is due under Paragraph {{pgmslaprov|11.2(b)}} — setting off all sums owed by one party against all sums owed by the other — is less fraught, and will always be a net payable back to the {{pgmslaprov|Lender}} (because the {{pgmslaprov|Borrower}} never transferred title to the pledged {{pgmslaprov|Collateral}} in the first place) | *The reckoning of what is due under Paragraph {{pgmslaprov|11.2(b)}} — setting off all sums owed by one party against all sums owed by the other — is less fraught, and will always be a net payable back to the {{pgmslaprov|Lender}} (because the {{pgmslaprov|Borrower}} never transferred title to the pledged {{pgmslaprov|Collateral}} in the first place) | ||
*There is no concept in the{{pgmsla}} of “{{pgmslaprov|Deliverable Securities}}” or “{{pgmslaprov|Receivable Securities}}”, seeing as there will not always be a receiver and a deliverer, so they don’t come into the frame for the reckoning of the {{pgmslaprov|Default Market Value}} in the same way. | *There is no concept in the{{pgmsla}} of “{{pgmslaprov|Deliverable Securities}}” or “{{pgmslaprov|Receivable Securities}}”, seeing as there will not always be a receiver and a deliverer, so they don’t come into the frame for the reckoning of the {{pgmslaprov|Default Market Value}} in the same way. | ||
===ISLA [[thought leader]]ship=== | |||
[[11 - Pledge GMSLA Provision|ISLA]] published a curious piece of thought leadership in September 2018 which painted a worst-case scenario timeline for closing out a {{pgmsla}} which made it look quite a bit worse than the corresponding critical path under a normal GMSLA — hardly [[calculated]] to set at ease the jittery nerves of a very modern [[agent lender]]. The perceived difference was this: | |||
{{tabletopflex|45}} | |||
{{aligntop}} | |||
!style="width: 50%"|{{gmsla}} | |||
!style="width: 50%"|{{pgmsla}} | |||
{{aligntop}} | |||
|Upon notice of default, {{gmslaprov|Non-Defaulting Party}} can start immediately liquidate and has 5 days to trade and set pricing to allow for liquidity. You have to return any excess. | |||
|Upon notice of default {{pgmslaprov|Non-Defaulting Party}} can theoretically start liquidating but has value the pledged {{gmslaprov|Collateral}} to be transferred. This may take a bit longer in an illiquid market. But seems to the [[JC]] there’s no reason you can’t execute trades in the collateral without physically holding it, seeing as it settles later. Any excess goes back to the pledgor. | |||
{{tablebottom}} | |||
In either case for the {{gmslaprov|Default Market Value}}, the main thing you’re valuing is the {{gmslaprov|Loaned Securities}} not (primarily) the {{gmslaprov|Collateral}}: as long as you aren’t ''under''-collateralised, and you take steps to get a reasonable price, you can sell ''all'' the {{gmslaprov|Collateral}} — remember, that’s how [[Security interest|security]] works — the Defaulting Party is in the soup and can’t be too particular about what happens to its collateral as long as, once the debt is satisfied, it gets the remainder back. If you ''are'' under-collateralised, it doesn’t make any odds whether you hold by pledge or title-transfer —either way, you are short. | |||