Property of an entity that is subject to a security interest (www.practicallaw.com/7-382-3812) or lien (www.practicallaw.com/8-382-3581) securing payment or performance of an obligation in favor of a secured party (www.practicallaw.com/8-382-3802). If the entity breaches its obligations to the secured party, the secured party will have rights and remedies with respect to the collateral.
For more information on taking security interests in collateral, see Practice Note, UCC Creation, Perfection and Priority of Security Interests (www.practicallaw.com/6-381-0551).
Collateral is often referred to in the context of swaps (www.practicallaw.com/0-382-3858) and derivatives (www.practicallaw.com/3-382-3404), as well as other types of trading, as margin (www.practicallaw.com/2-382-9864) collateral. For information on negotiating counterparty collateral arrangements in swaps and derivatives, prime brokerage (www.practicallaw.com/6-503-0876) and other contexts, see Practice Note, Counterparty Collateral Arrangements: Considerations for End Users (www.practicallaw.com/1-422-4430).