“Deliverable Securities” are Equivalent Securities or Equivalent Margin Securities which are to be delivered by the Defaulting Party. In other words, “Deliverable Securities” are securities that are to be returned to the non-Defaulting Party (but which haven’t been returned due to the default of the Defaulting Party). It is probably easiest to think of “Deliverable Securities” as being ‘securities that the non-Defaulting Party needs to replace’.
Within the context of the GMRA, the concept of “Deliverable Securities” is used in the calculation of “Default Market Value”, which forms part of the close-out mechanism under the GMRA. More specifically, Paragraph 10(f)(i) provides, inter alia, that if, on or around the Early Termination Date, the non-Defaulting Party has purchased “Deliverable Securities” which form part of the same issue and are of an identical type and description to the securities sold or purchased under the GMRA then the non-Defaulting Party can treat the aggregate cost of purchase as being the “Default Market Value”. In addition, Paragraph 10(f)(ii) of the GMRA provides, inter alia, that if, on or around the Early Termination Date, the non-Defaulting Party has received offer quotations (in other words, offers to sell) for Deliverable Securities from at least two market makers then the non-Defaulting Party may choose to take the average of those values as the “Default Market Value”.Contact Us