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Template:M summ Pledge GMSLA 11: Difference between revisions
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So, how does default and close-out differ between title transfer and pledge versions of the GMSLA, then? Not as much as you might think. The mechanism for determining who owes what is broadly the same but, since the {{pgmslaprov|Borrower}} hasn’t parted company with the {{pgmslaprov|Collateral}} it has pledged — ''yet'' — and byt the theory of the game the pledged Collateral is sitting quietly in a segregated account with a [[Triparty agent|triparty]] [[custodian]], ready to be returned or seized and liquidated, as the circumstances require, all of the {{pgmslaprov|Securities}} valuation mechanisms focus on the {{pgmslaprov|Loaned Securities}} leg of the transaction, since the Borrower won’t, if it has a scooby doo what it is doing, be holding the Loaned Securities at any time during the Loan. It will have [[Short selling|sold them short]]. | [[11 - Pledge GMSLA Provision|So]], how does default and close-out differ between title transfer and pledge versions of the GMSLA, then? Not as much as you might think. The mechanism for determining who owes what is broadly the same but, since the {{pgmslaprov|Borrower}} hasn’t parted company with the {{pgmslaprov|Collateral}} it has pledged — ''yet'' — and byt the theory of the game the pledged Collateral is sitting quietly in a segregated account with a [[Triparty agent|triparty]] [[custodian]], ready to be returned or seized and liquidated, as the circumstances require, all of the {{pgmslaprov|Securities}} valuation mechanisms focus on the {{pgmslaprov|Loaned Securities}} leg of the transaction, since the Borrower won’t, if it has a scooby doo what it is doing, be holding the Loaned Securities at any time during the Loan. It will have [[Short selling|sold them short]]. | ||
===It only really comes in to play if the Borrower has defaulted=== | ===It only really comes in to play if the Borrower has defaulted=== | ||
If the ''{{pgmslaprov|Lender}}'' has defaulted, you generally wouldn’t call an {{pgmslaprov|Event of Default}} under a {{pgmsla}}. There is no need: the {{pgmslaprov|Borrower}} just returns the {{pgmslaprov|Loaned Securities}}, security is released from its pledged {{pgmslaprov|Collateral}} and we all carry on our sedated ways. I mean ''sedate'' ways. Sure, if you’re a masochist you ''could'' invoke the default process of Paragraph {{pgmslaprov|11}}, but why would you? The {{pgmslaprov|Loan}} is terminable at will; if you ''do'' want out, just terminate it and give {{pgmslaprov|Equivalent}} {{pgmslaprov|Securities}} back, and the security is released from your pledged {{pgmslaprov|Collateral}}. Far easier. | If the ''{{pgmslaprov|Lender}}'' has defaulted, you generally wouldn’t call an {{pgmslaprov|Event of Default}} under a {{pgmsla}}. There is no need: the {{pgmslaprov|Borrower}} just returns the {{pgmslaprov|Loaned Securities}}, security is released from its pledged {{pgmslaprov|Collateral}} and we all carry on our sedated ways. I mean ''sedate'' ways. Sure, if you’re a masochist you ''could'' invoke the default process of Paragraph {{pgmslaprov|11}}, but why would you? The {{pgmslaprov|Loan}} is terminable at will; if you ''do'' want out, just terminate it and give {{pgmslaprov|Equivalent}} {{pgmslaprov|Securities}} back, and the security is released from your pledged {{pgmslaprov|Collateral}}. Far easier. | ||