The concept of the “Base Currency” is used for the following purposes:
- Calculating “Net Exposure” (and therefore “Net Margin”) for the purposes of margin maintenance. All amounts are converted into the Base Currency.
- Payment of Cash Margin – all cash margin must be paid in the Base Currency.
- Close-out netting – all amounts payable on a close out following an Event of Default are converted into the Base Currency.
It is quite normal to specify a different Base Currency for each of the above purposes. This is done in Annex I to the GMRA. Often, you will see the Base Currency election as being the home currency of the Defaulting Party. The reason for this is so as to ensure that there is no tension between the GMRA and local insolvency laws (which may require the conversion of all amounts into the local currency of the insolvent party).Contact Us