📃Security Trust Deed

Learn more about the security interest Lenders have in collateral for loans made via OpenTrade's Treasury Management Product.

All loans made via the OpenTrade Treasury Management % Yield Product are collateralised on a 1:1 basis with eligible loan collateral. A Security Trustee holds a security interest on behalf of Lenders in all collateral and the accounts in which collateral is held pursuant to a Security Trust Deed.

What is the Security Trust Deed?

The Security Trust Deed is a legal agreement that arranges for a Security Trustee to hold a master security interest in the collateral and accounts in which the collateral is held on behalf of the Lenders.

The Security Trust Deed and Security Trustee's objective is to protect Lenders by ensuring all loan proceeds and collateral is held in accounts over which the Security Trustee has a full security interest in so that in the event of a default, the collateral can be recovered to repay lenders.

As part of the MLA, the Borrower warrants that it has acquired or will acquire the collateral on the Loan Commencement Date and has granted a valid and fully perfected security interest in the collateral and the accounts in which the collateral is held pursuant to the Security Trust Deed.

Why use a Security Trust Deed and Trustee?

The use of a Security Trust Deed and Security Trustee is very common in the financial markets, especially in loan syndications and securitisation. It is done for the sake of efficiency, as it avoids the need to grant security separately to all creditors, which is costly and impractical for all parties.

What happens in the event of default?

In event of a Default under the MLA, each Lender can enforce their individual right to the collateral securing their loans by instructing the Security Trustee to either liquidate the collateral or hold the collateral to maturity. The Security Trustee will take control over the Secured Accounts and follow instructions of the creditors, including liquidating loan collateral to repay lenders.

Key Terms of the Security Trust Deed

Assignment of Security Interest to the Security Trustee

The Borrower assigns a continuing security interest to the Security Trustee all of its rights, title, interest and benefit, existing now and in the future, to each secured account (the digital asset wallets, cash, and securities accounts in which collateral is held) and the secured assets they hold (assets used as collateral for loans).

Restriction on movement of secured assets

Secured assets may only be moved from a secured account in order to discharge the obligations of the Borrower to the Secured Creditors (the Lenders) in accordance with the terms of the MLA. This includes:

  • Minting USDC with USD

  • Redeeming USDC for USD

  • Transferring USD to purchase collateral (e.g. US Treasury Bills)

  • Selling collateral to meet withdrawal requests.

This ensures that the Borrower can only move funds and assets as required to repay loans for the purposes of fulfilling its obligations under the MLA.

Other Key Terms include:

  • Notice of assignment to banks/custodians where collateral is held

  • Application of proceeds (aka the waterfall)

  • Receipt and execution of instructions from Lenders

  • Restrictions on changes the Borrower can make to its agreements to protect Lenders

Who is the Security Trustee?

OpenTrade SPC has appointed Mulvaney Trustees (UK) Ltd (dba Vantru) as Security Trustee.

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