Template:Failure to pay procedure: Difference between revisions

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 There is a bit of a [[chicken licken]]-and-egg situation here as you can’t really work out their [[mark-to-market]] values for that date at any time ''before'' that date, unless you are able to see into the future or something. Anyway, that’s a conundrum for your [[Trader|trading]] people (and in-house [[Metaphysics|metaphysicians]]) to deal with and it need not trouble we [[Legal Eagles|eagles of the law]]. For our purposes, the trading and risk people need to come up with {{{{{1}}}|Close-out Amount}}s for all outstanding {{{{{1}}}|Transaction}}s.  These are intended to be determined as of the Early Termination Date, that you designated before, and which is within 20 days of the date you sent your termination notice, but note:
-{{quote|Each {{{{{1}}}|Close-out Amount}} will be determined as of the {{{{{1}}}|Early Termination Date}} ''or, if that would not be [[commercially reasonable]], as of the date or dates following the {{{{{1}}}|Early Termination Date}} as '''would''' be [[commercially reasonable]]''.<ref>This is in the definition of {{isdaprov|Close-out Amount}} ({{2002ma}}) and {{isda92prov|Loss}} ({{1992ma}}). Curiously, Market Quotation in the {{1992ma}} does it slightly differently, saying “The party making the determination (or its agent) will request each Reference Market-maker to provide its quotation to the extent reasonably practicable as of the same day and time (without regard to different time zones) ''on or as soon as reasonably practicable after the relevant Early Termination Date''.” We ''guess'' that gives a bit of flexibility, but is not quite so clear-cut. we suppose the point is that the Non-Affected Party can presumably hit the prices offered by the Reference Market Makers — making the enormous assumption any will actually provide a price — and so isn’t subject to any market risk; which is good. But on the other hand, block-trading a huge portfolio on one day is likely to move the market, and not in a good way, for the defaulted client. We would like to think common-sense would prevail for those dinosaurs still on the 1992, and using the MQ concept. Then again, the fact that you are still on a 1992 twenty years after it was superseded suggests somewhat that common sense may be lacking somewhere in the relationship. </ref>}}
+{{quote|Each {{{{{1}}}|Close-out Amount}} will be determined as of the {{{{{1}}}|Early Termination Date}} ''or, if that would not be [[commercially reasonable]], as of the date or dates following the {{{{{1}}}|Early Termination Date}} as '''would''' be [[commercially reasonable]]''.<ref>This is in the definition of {{isdaprov|Close-out Amount}} ({{2002ma}}) and {{isda92prov|Loss}} ({{1992ma}}). Curiously, Market Quotation in the {{1992ma}} does it slightly differently, saying “The party making the determination (or its agent) will request each Reference Market-maker to provide its quotation to the extent reasonably practicable as of the same day and time (without regard to different time zones) ''on or as soon as reasonably practicable after the relevant Early Termination Date''.” We ''guess'' that gives a bit of flexibility, but is not quite so clear-cut. we suppose the point is that the Non-Affected Party can presumably hit the prices offered by the Reference Market Makers — making the enormous assumption any will actually provide a price — and so isn’t subject to any market risk; which is good. But on the other hand, block-trading a huge portfolio on an arbitrary day you had to set because of the random requirement for “not more than 20 days” is hardly calculated to help the Defaulting Party. You would like to think common-sense would prevail for those dinosaurs still on the 1992, who are using the Market Quotation concept. Then again, the fact that they are still on a {{1992ma}} twenty years after it was superseded suggests somewhat that common sense may be lacking somewhere in the relationship. </ref>}}
-'''This is very important'''. This means you don’t have to liquidate a portfolio in its entirety within 20 days, or even take the values as of that {{{{{1}}}|Early Termination Date}}. If you can, you should — but it may well not be commercially reasonable — or even possible — to. The [[Lehman]] insolvency took ''months'' to unwind. Note also that [[commercial reasonableness]] is viewed from the Non-Affected Party’s perspective. It is not a licence to do whatever the hell you want — but the court won’t second guess prudent application of your own models.
+'''This is very important'''. This means<ref>Arguably unless you’re on a 92 and using MQ — see footnote above</ref> you don’t have to liquidate a portfolio in its entirety within 20 days, or even take the values as of that {{{{{1}}}|Early Termination Date}}. If you can, you should — but it may well not be commercially reasonable — or even possible — to. The [[Lehman]] insolvency took ''months'' to unwind. Note also that [[commercial reasonableness]] is viewed from the Non-Affected Party’s perspective. It is not a licence to do whatever the hell you want — but the court won’t second guess prudent application of your own models.
 Once they have done that you are ready for your Section {{{{{1}}}|6(e)}} notice.