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Template:M summ 2018 CSD 13(h): Difference between revisions
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===What ''did'' they achieve?=== | ===What ''did'' they achieve?=== | ||
An unholy mess. The | An unholy mess. The starting point — crafted by [[sell-side]]-influenced squad{{tm}}, endeavours to match the ''regulatory'' margin regime as closely as possible to the broker-imposed ''contractual'' initial margin regime. But — and say what you like about the wisdom of regulation-enforced bilateral initial margin — bilateral, regulation enforced initial margin is a different prospect altogether. We suppose the squad may have been in some denial about this, and the worldwide community of regulators may have been in some denial that the sell-side would be in denial about it, too. But for the record, here are the differences: | ||
#. It is bilateral. Contractual margin tends not to be: the brokers require their customers to provide it. The customers don’t ask for it from brokers. | |||
#. It is [[title transfer]].<ref>Or there is a wide-ranging right of [[reuse]], which makes it ''effectively'' title transfer.</ref> Therefore, whoever holds initial margin generally has it, to use as it sees fit, at all times. Where initial margin is posted away to a third party custodian with expressly ''no'' right of reuse, things are different. | |||
#. It is held in safe-keeping by a third party: again, if you don’t hold the margin, you can’t reuse it, are not meant to be able raise funds against it, it does not secure present [[indebtedness]],<ref>Okay, this is true of all initial margin. But where you don’t even hold it, there should not be the temptation, you know?</ref> it is there purely as a credit default mitigant. | |||
That starting point, therefore — “an {{isdaprov|Early Termination Date}} in respect of all {{isdaprov|Transaction}}s has occurred or been designated as the result of an {{isdaprov|Event of Default}} or {{imcsdprov|Access Condition}} with respect to the {{imcsdprov|Chargor}}” — is one buy-side counsel are unlikely to like, as it allow a {{imcsdprov|Secured Party}} to spring {{imcsdprov|Posted Credit Support (IM)}} ''out'' of the {{imcsdprov|Custodian}}’s possession at an arbitrary date at which time you do not know whether you are even owed anything. You don’t even know whether you are owed anything ''on'' the {{isdaprov|Early Termination Date}} for that matter (and since it is bilateral, nor, really should [[sell-side]] [[legal eagle]]s like it, either). | |||
''Or'' you can elect to let your {{imcsdprov|Control Agreement}} govern. | ''Or'' you can elect to let your {{imcsdprov|Control Agreement}} govern. | ||
===What would the JC suggest?=== | ===What would the JC suggest?=== | ||
If you can resist the urge to fire them at ISDA’s headquarters, you can damn the torpedoes and take the [[JC]]’s recommendation, as discussed below. | If you can resist the urge to fire them at ISDA’s headquarters, you can damn the torpedoes and take the [[JC]]’s recommendation, as discussed below. | ||