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’ […]

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 […]

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’ […]

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 […]

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 […]

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 […]

“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 […]

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 […]

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 […]