Income Payment Date

Broadly, an “Income Payment Date” is the date when a party to a Repurchase Transaction can be certain that “Income” in relation to a security held pursuant to that Repurchase Transaction is being paid to the party in question.

The exact “Income Payment Date” depends on whether the underlying securities are bearer securities or registered securities.

If the underlying securities are bearer securities, the “Income Payment Date” is the date on which “Income” (in other words, distributions due in relation to the underlying securities) is paid in respect of those securities.

If the underlying securities are registered securities, the “Income Payment Date” is the date by reference to which the registered holders of the securities are identified as being entitled to the payment of Income. Broadly, if a party is holding securities transferred to it under a Repurchase Transaction over an “Income Payment Date” then, on the same day as the “Income” is paid by the issuer of the relevant securities to that party, the recipient of the payment is required to pay an equal amount (in the same currency) to its counterparty.  This applies irrespective of whether he securities in question are the “Purchased Securities” (in other words, the securities originally provided by the borrower as collateral for the ‘loan’) or “Margin Securities (in other words, collateral provided by either party as part of normal margining).  In doing so, the party which originally transferred the collateral (and, from an economic point of view at least which can be viewed as the ‘ultimate owner’ of the securities (the term used loosely)) does not lose out on any income associated with those securities.

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