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Equivalent Margin Securities

The concept of “Equivalent Margin Securities” must not be confused with the concept of “Equivalent Securities”, although both rest on the concept of “equivalence” (otherwise known as ‘fungibility’ – the ability of a good or asset to be interchanged with other individual goods or assets of the same type). The definition of “Equivalent Securities” refers […]

GMRA A-Z: Default Notice

The main difference between, on the one hand the 1995 and 2000 GMRAs and, on the other hand, the 2011 GMRA insofar as they relate to “Events of Default” lies in the way in which the concept of the “Default Notice” is used. Under the 1995 and 2000 GMRAs, the delivery of a “Default Notice” […]

GMRA A-Z: Default Market Value

Whilst the definition of “Market Value” is used for the purposes of calculating the value of securities under the margin maintenance provisions, a different concept is used to value collateral on a close-out.  This is the concept of “Default Market Value”. If we take a step back, it makes sense to use ‘just the normal’ […]

GMRA A-Z: Contractual Currency

At a high level, the “Contractual Currency” is the currency in which the “Purchase Price” and the “Repurchase Price” (but not a close-out amount) is denominated.  In addition, the concept of the “Contractual Currency” is also used in the definition of “Market Value”.  As such, calculations of the value of Purchased Securities are converted into […]

GMRA: A-Z Confirmation

In simple terms, a “Confirmation” is a document which records the economic terms of a specific Repurchase Transaction entered into under a Global Master Repurchase Agreement. Confirmations must be in writing and should provide certain basic information regarding the underlying Repurchase Transaction, including: A description of the “Purchased Securities” (in other words, the collateral which […]

GMRA A-Z: Close-out netting

Close-out netting is a process which takes place following the termination of transactions.  In summary, all transactions where a party owes its counterparty money are set-off against those transactions where the counterparty owes the first party money in order to produce a single, net, sum.  The purpose is to reduce credit risk as well as […]

GMRA A-Z: Cash Margin

“Cash Margin” is a cash sum paid by the Buyer or the Seller by way of margin.  It forms part of the definition of “Margin Transfer” and is a factor in calculating “Net Margin”.  Obviously, being regarded as margin, “Cash Margin” is also factored into close-out calculations. In essence, “Cash Margin” is really a top-up […]

GMRA A-Z: Cash Equivalent Amount

The “Cash Equivalent Amount” is a concept that is found in Paragraph 4(h) of the 2011 GMRA.  Implicitly, Paragraph 4(h) recognises the possibility that a party to a Repurchase Transaction may not be able to deliver securities to its counterparty due to the occurrence of a “short squeeze”. A “short squeeze” can occur when demand […]

GMRA A-Z: Automatic Early Termination

Normally, under Paragraph 10(b) of the 2011 GMRA, if an Event of Default has occurred and is continuing, then the non-Defaulting Party may (by sending a notice to its counterparty) designate a day as an Early Termination Date in respect of all outstanding Transactions.  This has the effect of bringing forward the Repurchase Date with […]

GMRA A-Z: Adjustment Date

The concept of an “Adjustment Date” is relevant to the ‘transaction adjustment’ methodology described under Paragraph 4(l) the GMRA whereby an “Original Transaction” is ‘adjusted’ on the “Adjustment Date” with the result that it is terminated and replaced by a “Replacement Transaction”.  At a high level, the adjustment process is an alternative to making a […]

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