Mastering Securities Lending Documentation

Description

Securities lending master agreements are vital for covering securities loans between contracting parties. They also offer legal and credit protection and a close-out netting procedure if a party defaults or goes bankrupt. These agreements are widely used by banks, securities houses, pension funds, hedge funds and insurance companies.

Mastering Securities Lending Documentation is a practical guide to understanding the negotiation of these master agreements used in the United Kingdom, United States and Europe. It is an essential handbook for anyone involved in negotiating these agreements and includes:

• An introduction to the history and operations of the market
• A clear, user-friendly explanation of all paragraphs of the master agreements
• An easy-to use split page format with the original text and commentary
• Examples of commonly negotiated additions and amendments and their implications
• Answers to legal, risk and operational questions

Securities lending master agreements are vital for covering securities loans between contracting parties. They also offer legal and credit protection and a close-out netting procedure if a party defaults or goes bankrupt. These agreements are widely used by banks, securities houses, pension funds, hedge funds and insurance companies.

Mastering Securities Lending Documentation is a practical guide to understanding the negotiation of these master agreements used in the United Kingdom, United States and Europe. It is an essential handbook for anyone involved in negotiating these agreements and includes:

• An introduction to the history and operations of the market
• A clear, user-friendly explanation of all paragraphs of the master agreements
• An easy-to use split page format with the original text and commentary
• Examples of commonly negotiated additions and amendments and their implications
• Answers to legal, risk and operational questions

Chapter 1: Introduction to the securities lending market (30 pages)
-Size of market according to latest industry figures.
-Types of securities loan transactions.
– Differences between repos and securities loans
-Main players
-Regulatory infrastructure in the UK and USA.
-The influence of automation.
-How a deal is done from start to finish.
Chapter 2: Risk issues ( 5 pages)
– Counterparty risk
– Issuer risk
– Market risk
– Operational risk
– Legal risk
– Collateralised nature of the product.
Chapter 3: Legal issues (8 pages)
– Nature of the transaction
– Ownership of the securities
– Drawbacks of recharacterisation
– English law legal opinion by Richard Sykes QC
– SIFMA legal opinions
Chapter 4: Evolution of master agreement documentation (6 pages)
– Inefficiency in documenting trades in the market’s early days.
– Documentation standardisation in the 1990s.
– Description of the different master agreements
– The benefits they confer.
Chapter 5: Section by section clear analysis of the Global Master Securities Lending Agreement (2000) (65 pages).
The idea is as before to have a block of Global Master Securities Lending Agreement (2000) text highlighted on a page and a clear explanation of it underneath.
Chapter 6: Section by section clear analysis of the Global Master Securities Lending Agreement (2009) (75 pages).
Same format.
Chapter 7: Section by section clear analysis of the European Master Agreement and its Product Annex for Securities Loans (2004) (58 pages)
Same format.
Chapter 8: Section by section clear analysis of the US Master Securities Lending Agreement (70 pages)
Same format.
Chapter 9: The credit crunch and likely future of the securities lending market (6 pages)
Chapters 5, 6 and 8 are the hub of the book because negotiators need core knowledge of these master agreements and awareness of possible variations proposed in their Schedules and their implications.

• A practical guide to the understanding and negotiation of the key securities lending contracts used in the US, UK and Europe. These are the Global Master Securities Lending Agreements, the European Master Agreements and the US Master Securities Lending Agreements.
• The book briefly describes the history and operations of the securities lending market and then goes on to explain the legal issues, risk issues, and differences between different types of loans and in agreements.
• In the same format as Mastering the ISDA Master Agreements, the book will then provide a commentary on each of the master agreements.
• There are two major securities associations, the documents of each will be used in this book:
  – ISLA   – The International Securities Lending Association
  – SIFMA – the Securities Industry and Financial Markets Association

Market

• The Business Finance market was worth almost £1.5 million in 2009.
• Pearson Education is the second biggest publisher in the Business Finance market, with over 17% market share.

Benchmark

• Mastering Derivatives Markets (9780273709787), Published December 2006, 2,073 copies sold (TCM Nielsen Bookscan).

Paul Harding is the founder and managing director of Derivatives Documentation Limited, a derivatives consultancy and project management company based in the City of London providing negotiation, recruitment and in-house training services in derivatives documentation. He has also written A Practical Guide to the 2003 ISDA Credit Derivatives Definitions and A Practical Guide to Using Repo Master Agreements (Euromoney Books, 2004).

Christian Johnson has taught courses on finance, derivatives and tax for thirteen years and has published 4 books and over 36 articles on these topics. His three books on OTC derivatives and repo documentation have become standard texts in the area. Professor Johnson has provided training on OTC derivatives, repos and securities lending for large institutions such as ABN AMRO, Wachovia, and other large financial institutions. He also teaches across the globe on a regular basis for Euromoney where he has given courses on repos and securities lending in London and Johannesburg.

Securities lending master agreements are vital for covering securities loans between contracting parties. They also offer legal and credit protection and a close-out netting procedure if a party defaults or goes bankrupt. These agreements are widely used by banks, securities houses, pension funds, hedge funds and insurance companies.

Mastering Securities Lending Documentation is a practical guide to understanding the negotiation of these master agreements used in the United Kingdom, United States and Europe. It is an essential handbook for anyone involved in negotiating these agreements and includes:

• An introduction to the history and operations of the market
• A clear, user-friendly explanation of all paragraphs of the master agreements
• An easy-to use split page format with the original text and commentary
• Examples of commonly negotiated additions and amendments and their implications
• Answers to legal, risk and operational questions

Additional information