场外衍生品的清偿优先级与优先未保护债务相比如何?

2016/1/25 posted in  观点

OTC derivative VS senior unsecure debt

Q:
在实际操作中,一个公司default, 他的otc derivative 的交易对象跟senior unsecure debt的持有人 negiciation power 差不多吗?

A:
Here in the US, the real protection for counterparty in an OTC derivative transaction is the collateral, but the collateral is also subject to market risk.

Once it goes to bankruptcy court, it plays by a different rule book and whatever we know in normal condition will no longer hold.There could be lots of surprises and the results are hard to predict.It can be very arbitrary.In that case it sometimes is very similar to the behind the door negation in Chinese market

Q:
for the detailed explaination
Workout对OTC derivative 影响不大是吗,因为collateral?

A:
In terms of collateral, haircut is applied to different credit quality. Usually people prefer cash or cash equivalent like US treasury, which in the past I remember gets about 98%
The most ideal is to get as much collateral and avoid bankruptcy court
Once in bankruptcy court, OTC counterpart don’t have much priority in terms of getting paid
Workout affects all credits including OTC counterparty but they don’t have much influence over the outcome

I want to say that when it comes to collateral management, it’s better to have an independent third party custodian holding the collaterals instead of the counterparty, in a customer designated account. Also needs to ask the question if the collaterals can be rehypothecated, meaning if they are re-used to collateralize other transactions. This is a very common practice and it has real impact on the creditors interest in the collaterals, a limit on how much of the collateral for rehypothecation can be be negotiated if the party is powerful enough

Additionally, terms like two way margin, periodic variation margin posting negotiated in the ISDA CSA and the netting mechanism for derivatives are all active counterparty risk management tools to limit exposures in the normal course of business, so even if the counterpart default, hopefully the damage is already limited