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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 […]

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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 […]

Decimated LIBOR zombies stagger on

On the 23 November 2022, the FCA announced a significant extension for 3m GBP synthetic LIBOR and proposed the publication of synthetic USD LIBOR settings until 30 September 2024.  The Regulator will employ its powers under the UK Benchmarks Regulation to compel ICE Benchmark Administration to publish 3m synthetic LIBOR until 31 March 2024. The […]

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 […]

Transactions Costs

The concept of “Transactions Costs” is relevant when calculating “Default Market Value” for the purposes of close-out under the GMRA. “Transaction Costs” are simply reasonable costs, commission, fees and expenses incurred in connect with the purchase of Deliverable Securities or the sale of Receivable Securities.

Time of the essence

Paragraph 6(g) of the 2011 GMRA states that “Time shall be of the essence in this Agreement”.  The effect of making ‘time of the essence’ depends on whether contractual rights or contractual obligations are being considered. If time is of the essence for exercising a contractual right, then the right is generally lost if not […]

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