Termination of this Agreement - Pledge GMSLA Provision
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2018 Global Master Securities Lending Agreement (Pledge version)
A Jolly Contrarian owner’s manual™ Termination in a Nutshell™
Original text
Resources and Navigation
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Comparisons
Pledge GMSLA
First, curiously, the 2018 Pledge GMSLA inserts the right to terminate the entry into of further Loans under this Agreement — a genuine “WTF” moment there, since there is no obligation to enter into any Loan at any time that you don’t want to anyway — and the second is to add a chicken-lickenish statement of the bleeding obvious that if one terminates the Agreement that doesn’t whip away the rug from under your carefully constructed the security arrangements — at least not until you’ve sorted out the outstanding Loans and returned whatever you have borrowed.
ISDA
By way of further comparison, the ISDA Master Agreement doesn’t have a general termination right of this sort at all. You can only terminate Transactions, not the master agreement construct which sits around them itself. It is an immortal husk.
Basics
For reasons we get into more detail about in the premium section (see why termination on notice is useful) there is something to be said for being able to terminate on notice something the ISDA Master Agreement does not contemplate). While it does not affect any outstanding Loan, seeing as Loans are, if not outright callable, usually short-dated and preternaturally re-marked to market, outstanding Loans are not an enormous barrier to sweeping the whole arrangement away.
Course of dealings
What on earth, you might muse, is a “course of dealing”? According to BusinessDictionary.com, it is “a pattern of normal business conduct between two parties. It is established over a period involving several transactions, and may be used as a reliable indicator of how they intend to deal in the future.”
In any weather, it adds nothing but heft to this clause. This is a standard termination on notice clause for the 1995 OSLA itself, but doesn’t cut across the terms — and in particular, any stipulated term for any loan, which will be set out in a Borrowing Request[1] They made a much better fist of it in the GMSLA.
So before you can use this clause, you must validly terminate each loan under the terms of its Borrowing Request.
Grand guignol, ISDA style
The ISDA’s hesitance on this unimportant topic, we venture, is to do with paranoid fears about the efficacy of its sainted close-out netting terms — meh; maybe — but we like to think it has unleashed on the world an army of wight-walker zombie ISDAs, doomed to roam the earth until the day of judgment, apropos nothing but there, undead, and ready to animate and rally to the banner of Sauron, Beelzebub, Lehman Brothers etc., should they be reincarnated, to rain apocalyptic hell on the armies of men. We have written a whole article about it.
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Premium content
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See also
References
- ↑ Curiously, the OSLA doesn’t define a “loan” as such, but rather refers to the terms, accepted by the Lender, of a Borrowing Request. This is counting-sheep-legs-and-dividing-by-four behaviour, calculated to discombobulate non-specialists and keep them away.