Template:Isda 9(c) summ: Difference between revisions

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-In which {{icds}} grapple with the existential question: if I [[close out]] all my {{{{{1}}}|Transaction}}s because the other guy fundamentally [[Breach of contract|breached the contract]], can I still rely on the good bits of my contract to manage my risk position and enforce my bargain?
+=====Netting and [[close-out]]=====
+Why should this matter here? Well, because ''[[netting]]'', in a word. Here the fabulous nuances of the {{isdama}} come into play. [[Close-out netting]] — as we all know, a clever if somewhat artificial and, in practical application, quite [[tedious]] concept — is not something that just happens by operation of the [[common law]]. [[Set-off]], which does, is a narrower and flakier thing requiring all kinds of mutuality that might not apply to your {{isdama}}.
-We are deep into [[Ontology|ontological]] territory here, fellows. For while the same thing might be an {{{{{1}}}|Event of Default}} ''and'' a [[Fundamental breach|fundamental breach of contract]] — almost certainly will be, in fact — treating that event as an {{{{{1}}}|Event of Default}} is to see it as “infra-contractual action”<ref>I just made that expression up, by the way</ref> being a circumstance contemplated by and provided for within the four corners of your compact; while if you see it as a [[fundamental breach]] you thereby cast your contract on the fire — what good are the promises in it, after all, if the other fellow won’t keep them? — and prostrate yourself at the feet of the [[Queen’s Bench Division]] for redress from among the golden threads developed by the [[common law]]. But these [[common law]] principles are ''about'' the contract, they are not rules ''of'' the contract. The [[contract]] itself it a smoldering husk.
+The contractual device of [[close-out netting]], by contrast, relies on the patient midwifery of {{icds}} and the sophisticated contrivances they popped into the {{isdama}}: especially the parts that say all {{{{{1}}}|Transactions}} form a {{{{{1}}}|Single Agreement}}, and those long and dusty passages in Section {{{{{1}}}|6}} which painfully recount how one terminates those {{isdaprov|Transaction}}s and nets down all the resulting exposures should things go tits up.
-Why does this matter here? Well, because ''[[netting]]'', in a word. Here the fabulous nuances of the {{isdama}} come into play. [[Close-out netting]] — as we all know, a clever if somewhat artificial and, in practical application, quite [[tedious]] concept — is not something that just happens by operation of the [[common law]]. [[Set-off]], which does, is a narrower and flakier thing requiring all kinds of mutuality that might not apply to your {{isdama}}.
-The contractual device of [[close-out netting]], by contrast, relies on the patient midwifery of {{icds}} and the sophisticated contrivances they popped into the {{isdama}}: especially the parts that say all {{{{{{1}}}|Transactions}} form a {{{{{{1}}}|Single Agreement}}, and those long and dusty passages in Section {{{{{1}}}|6}} which painfully recount how one terminates those {{isdaprov|Transaction}}s and nets down all the resulting exposures should things go tits up.
 Now, it really wouldn’t do if one were found to have thrown those clever legal artifacts on the fire ''before'' seeking the [[common law]]’s help to manage your way out of a portfolio with a busted counterparty would it. Section {{{{{1}}}|9(c)}} is there to [[For the avoidance of doubt|avoid the doubt]] that you might have done so: Just because you’ve declared an {{{{{1}}}|Early Termination Date}}, that doesn’t mean ''all'' bets are off. Just the live {{{{{1}}}|Transactions}}.
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 As far as the [[JC]] can see, through his fogged-up, purblind spectacles, this doubt, like most, didn’t ''need'' avoiding and shouldn’t have been present in the mind of a legal eagle of stout mental fortitude: it is clear on its face that terminating a transaction under pre-specified mechanism in the contract is not to cancel the contract and sue for damages, but to exercise an option arising under it, and all your mechanical firepower remains in place.
-Indeed, there is no mechanism for terminating an {{isdama}} itself, at all. This has led at least [[Jolly Contrarian|one commentator]] to [[Undead ISDA|hypothesise]] that this proves that derivatives trading is all some ''Illuminati'' conspiracy.
+Indeed, there is no mechanism for terminating an {{isdama}} itself, at all. Even in peace-time. This has led at least [[Jolly Contrarian|one commentator]] to [[Undead ISDA|hypothesise]] that this proves that derivatives trading is all some kind of ''Illuminati'' conspiracy.