Receivable Securities

The concept of “Receivable Securities” is relevant to the calculation of “Default Market Value” which forms part of the close-out mechanism under the GMRA.

“Receivable Securities” are Equivalent Securities or Equivalent Margin Securities to be delivered to the Defaulting Party (i.e. to be delivered by the non-Defaulting Party).

In simple terms, if a non-Defaulting Party fails to receive a payment which is due to it, it may sell any securities it holds (which must ultimately be ‘returned’ to the Defaulting Party) in order to make itself whole (or at least minimise any loss that it would otherwise suffer).  These securities are known as “Receivable Securities” under the Global Master Repurchase Agreement.  The sale proceeds (or bid quotes) associated with the “Receivable Securities” are factored into to “Default Market Value” calculations performed by the non-Defaulting Party.

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