Template:Isda Specified Entity summ: Difference between revisions

Latest revision as of 16:22, 2 January 2024

A {{{{{1}}}|Specified Entity}} is any affiliate of a counterparty to an ISDA Master Agreement which is designated in the relevant Schedule.

It is relevant to the definition of {{{{{1}}}|Cross Default}} and {{{{{1}}}|Default under Specified Transaction}} in that it widens the effect of those provisions to include defaults by the parties specified.

It is so (~ cough ~) important that it is, literally, the first thing you see when you regard an ISDA {{{{{1}}}|Schedule}}.

The same concept in both versions of the ISDA Master Agreement only with different clause numberings. {{{{{1}}}|Specified Entity}} is relevant to:

{{{{{1}}}|DUST}}
{{{{{1}}}|Cross Default}}
{{{{{1}}}|Bankruptcy}}
{{{{{1}}}|Credit Event Upon Merger}}

And of course the {{{{{1}}}|Absence of Litigation}} representation. Let’s not forget that.

Each party designates its Specified Entities for each of these events in Part 1(a) of the Schedule, which gives the Schedule its familiar layout:

(a) “Specified Entity” means in relation to Party A for the purpose of:― Section 5(a)(v), [SPECIFY]. Section 5(a)(vi), [SPECIFY]. Section 5(a)(vii), [SPECIFY]. Section 5(b)(v), [SPECIFY]. and in relation to Party B for the purpose of:― Section 5(a)(v), [SPECIFY]. Section 5(a)(vi), [SPECIFY]. Section 5(a)(vii), [SPECIFY]. Section 5(b)(v), [SPECIFY].

Now, why would anyone want different Affiliates to trigger this a {{{{{1}}}|Event of Default}} depending precisely upon how they cork-screwed into the side of a hill? Well, there is one reason where it might make a big difference when it comes to {{{{{1}}}|Bankruptcy}}, and we will pick that up in the premium section. But generally — and even in that case, really — in our time of variation margin it really ought not to be the thing that is bringing down your ISDA Master Agreement.

Note it also pops up as relevant in the “{{{{{1}}}|Absence of Litigation}}” representation in Section {{{{{1}}}|3(c)}} of the 2002 ISDA.

@@ Line 1: / Line 1: @@
-{{{{{1}}}|Specified Entity}} is so (~ cough ~) important that it is literally the first thing you see when you regard an ISDA {{{{{1}}}|Schedule}}.
+A {{{{{1}}}|Specified Entity}} is any affiliate of a counterparty to an {{isdama}} which is designated in the relevant Schedule.
-Painstakingly set out, separately for {{{{{1}}}|Events of Default}} (namely {{{{{1}}}|DUST}} (Section {{{{{1}}}|5(a)(v)}}), {{{{{1}}}|Cross Default}} (Section {{{{{1}}}|5(a)(vi)}}) and {{{{{1}}}|Bankruptcy}} (Section {{{{{1}}}|5(a)(vii)}}) and the one {{{{{1}}}|Termination Event}} (Credit Event Upon Merger (Section {{{{{1}}}|5(b)(v)}}  — as if you would want different Affiliates to trigger this event depending on precisely ''how'' they cork-screwed into the side of a hill), and jointly for the “{{{{{1}}}|Absence of Litigation}}” representation in Section {{{{{1}}}|3(c)}} of the {{2002ma}}.
+It is relevant to the definition of {{{{{1}}}|Cross Default}} and {{{{{1}}}|Default under Specified Transaction}} in that it widens the effect of those provisions to include defaults by the parties specified.
-A {{{{{1}}}|Specified Entity}} is any affiliate (or, in theory at any rate, even a non-affiliate, if your risk officer is a total cretin) of a counterparty to an {{isdama}} which is designated in the relevant Schedule.
+It is so (~ cough ~) important that it is, literally, the first thing you see when you regard an ISDA {{{{{1}}}|Schedule}}.
-It is relevant to the definition of {{{{{1}}}|Cross Default}} and {{{{{1}}}|Default under Specified Transaction}} in that it widens the effect of those provisions to include defaults by the parties specified.
+The same concept in both versions of the {{isdama}} only with different clause numberings. {{{{{1}}}|Specified Entity}} is relevant to:
+*{{{{{1}}}|DUST}}
+*{{{{{1}}}|Cross Default}}
+*{{{{{1}}}|Bankruptcy}}
+*{{{{{1}}}|Credit Event Upon Merger}}
+And of course the {{{{{1}}}|Absence of Litigation}} representation. Let’s not forget that.
-===Nominating {{{{{1}}}|Specified Entities}} for yourself under {{isdaprov|DUST}} has its upsides===
+Each party designates its Specified Entities for each of these events in Part 1(a) of the Schedule, which gives the Schedule its familiar layout:
-For the most part, allowing any of your friends or relations to be named as your {{{{{1}}}|Specified Entity}} widens the range of vicissitudes of which you may fall foul, and therefore [[inure]]s solely for the benefit of your counterparty. In otherwords, if you can get away with it, don’t agree to name any of your affiliates as {{isdaprov|Specified Entities}}.
+{{subtableflex|47|
+{{ISDA Master Agreement 2002 Schedule Part 1(a)}} }}
-There is one exception, and that is Section {{isdaprov|5(a)(v)}} {{isdaprov|Default Under Specified Transaction}}).
+Now, why would anyone want different Affiliates to trigger this a {{{{{1}}}|Event of Default}} depending precisely upon ''how'' they cork-screwed into the side of a hill? Well, there is one reason where it might make a big difference when it comes to {{{{{1}}}|Bankruptcy}}, and we will pick that up in the premium section. But generally — and even in that case, really — in our time of variation margin it really ought not to be the thing that is bringing down your {{isdama}}.
-of those provisions also to include defaults ''by'' the other side (and its {{{{{1}}}|Specified Entities}}) under their contracts with ''your'' {{{{{1}}}|Specified Entities}} — so there ''is'' some benefit to naming ''your'' [[affiliates]], friends and relations as {{{{{1}}}|Specified Entities}}. But given how unlikely you are to be actually monitoring how a counterparty performs with an affiliate, it’s more of a false comfort than a real one.
+Note it also pops up as relevant in the “{{{{{1}}}|Absence of Litigation}}” representation in Section {{{{{1}}}|3(c)}} of the {{2002ma}}.

Template:Isda Specified Entity summ: Difference between revisions

Latest revision as of 16:22, 2 January 2024

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