Template:Specified indebtedness capsule

{{{{{1}}}|Specified Indebtedness}} is a simple and innocuous enough provision. Almost redundant, you’d think — why go to the trouble of defining “borrowed money” as another term? (Answer: because many firms, in their wisdom, will wish to change the definition in the {{{{{1}}}|Schedule}} to include derivatives, other trading exposures, things owed to their affiliates, or even any payment obligations of any kind, and for those people, “{{{{{1}}}|Specified Indebtedness}}” is a (somewhat) less loaded term.

In any case, what should one make of “borrowed money”? Could it include repo and stock loan obligations under securities financing transactions? Amounts owed to trade creditors? (In each case no, according to Simon Firth - see here).

Initial margin: a trick for young players

What of a failure to pay an [{csaprov|Independent Amount}}? Technically this is not a payment of indebtedness, and if the IM payer is up-to-date on variation margin payments, there may not be any indebtedness at all. Indeed, once the IM payer has paid required IM, the IM receiver becomes indebted to the payer for the return of the initial margin — so while it certainly comprises a failure to pay when due, the value of the {{{{{1}}}|Specified Indebtedness}} that failure contributes to the {{{{{1}}}|Threshold Amount}} might be nil, or even negative. This, your risk people will say, is why one should widen {{{{{1}}}|Specified Indebtedness}} to include all payment obligations, but that, for a host of reasons you can find here — is whopping great canard a l’orange in this old contrarian’s opinion.