Template:M summ 2000 GMSLA Market Value

A curate’s egg: in some ways superior to the succeeding language; in others worse.

“suspended”

The word “suspended” — lower case — is not defined, and in cases of extreme market disruption — wars, international diplomatic incidents, sanctions and so forth — could be a topic of hot debate, but we think the concept should be read in a fair, large and liberal way to achieve a purposive outcome.

If you can’t get a price because the stock has gone to hell in a handbasket, then the same should apply equally if the whole world including the stock has gone to hell in a handbasket. So, practically, if you cannot buy or sell the stock in the market at all, even if not formally “suspended” in the sense intended by the listing rules of the market it trades on — and it doesn’t say “suspended from its listing” or something like that, and easily it could have done — then the stock is still suspended. You can’t, broadly, trade it. This seems the right outcome.

“For the purposes of Paragraph 5” means when valuing to calculate margin calls. if the instrument — whether it be the Loaned Securities or Collateral — is in such a handbasket, you just damn the torpedoes and value it at nil. That is the risk you run in owning that instrument. A Borrower who has borrowed a stock which one cannot even fathom a value for will be anxious to get its Collateral back from a Lender who is, by definition, badly exposed to the value of that suspended stock. Banks, brokers and those on the borrowing end in triparty arrangements will have a sense of humour failure if they can’t claw back some of the collateral they have posted against borrowed securities issued by a vassal asset of a sanctioned oligarch, right?

The wording for the valuation in any other case other than Paragraph 5 of the last traded price or the price agreed by the parties leaves something to be desired in the certainty department, but since collateralising is really the main reason for needed a market value one can perhaps forgive this, until it comes to working out what to do where the Parties have failed to return Securities or Collateral under Paragraph 9.