Whilst the definition of “Market Value” is used for the purposes of calculating the value of securities under the margin maintenance provisions, a different concept is used to value collateral on a close-out.  This is the concept of “Default Market Value”. If we take a step back, it makes sense to use ‘just the normal’ […]

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 […]

Whilst the definition of “Market Value” is used for the purposes of calculating the value of securities under the margin maintenance provisions, a different concept is used to value collateral on a close-out.  This is the concept of “Default Market Value”. If we take a step back, it makes sense to use ‘just the normal’ […]

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 […]

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 […]

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 […]

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 […]

“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 […]

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 […]