196 Pages Posted: 16 Mar 2008 Last revised: 4 Sep 2011
Date Written: 1999
The commercial law governing repledge of pledged securities was rendered almost irrelevant in the 1930s by changes in federal law that effectively federalized the subject in the one transactional setting in which the practice was commonly used - namely, a broker's repledge of its customers' margin securities. The subject is now important again, due to the widespread use of repledge in other settings (notably over-the-counter derivatives transactions), and to the growth of analogous products, such as repurchase transactions. This paper comprehensively analyzes the commercial law of repledge. In so doing it explores some basic weaknesses in the conceptual underpinnings of the1994 revision of Article 8 of the Uniform Commercial Code, pertaining to investment securities. It also explores weaknesses in the provisions of Article 9 of the Uniform Commercial Code, pertaining to secured transactions, that are addressed specifically to repledge.
Keywords: repledge, rehypothecate, repurchase agreement, repo, securities lending, margin lending, securities, secured transaction, Article 8, Article 9, uniform commercial code, indirect holding system, direct holding system, official comments
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