Valuation Date - CSA Provision

ISDA 1995 English Law Credit Support Annex A Jolly Contrarian owner’s manual™ Go premium Overview — Summary — Premium — See also — Wikitext Crosscheck: →NY OG →Eng OG →NY VM →Eng VM →Eng IM Valuation Date and Time in a Nutshell™ The JC’s Nutshell™ summary of this term has moved uptown to the subscription-only ninja tier. For the cost of ½ a weekly 🍺 you can get it here. Sign up at Substack. Original text: “Valuation Date” means each date specified in or otherwise determined pursuant to Paragraph 11(c)(ii). “Valuation Time” has the meaning specified in Paragraph 11(c)(iii). 11(c) Valuation and Timing. 11(c)(i) “Valuation Agent” means, for purposes of Paragraphs 2 and 4, the party making the demand under Paragraph 2, and, for purposes of Paragraph 5(c), the Transferee, as applicable, unless otherwise specified here: [SPECIFY] 11(c)(ii) “Valuation Date” means: [SPECIFY] 11(c)(iii) “Valuation Time” means: [ ] the close of business in the place of location of the Valuation Agent on the Valuation Date or date of calculation, as applicable; [ ] the close of business on the Local Business Day immediately preceding the Valuation Date or date of calculation, as applicable; provided that the calculations of Value and Exposure will, as far as practicable, be made as of approximately the same time on the same date. 11(c)(iv) “Notification Time” means 1:00 p.m., London time, on a Local Business Day, unless otherwise specified here: [SPECIFY] The varieties of ISDA CSA Subject 1994 NY 1995 Eng 2016 VM NY 2016 VM Eng 2018 IM Eng Preamble Pre Pre Pre Pre Pre Interpretation 1 1 1 1 1 Security Interest 2 - 2 - 2 Credit Support Obligations 3 2 3 2 3 Transfers, Calculations and Exchanges - 3 - 3 - Conditions Precedent, Transfer Timing, Calculations and Substitutions 4 - 4 - 4 Dispute Resolution 5 4 5 4 5 Holding and Using Posted Collateral 6 - 6 - 6 Transfer of Title, No Security Interest - 5 - 5 - Events of Default 7 6 7 6 7 Rights and Remedies 8 - 8 - 8 Representations 9 7 9 7 9 Expenses 10 8 10 8 10 Miscellaneous 11 9 11 9 11 Definitions 12 10 12 10 12 Elections and Variables 13 11 13 11 13 Resources and Navigation Index: Click ᐅ to expand: 1994 NY CSA 1995 CSA 2016 VM CSA

Overview

Valuation Date

The Valuation terms as between 1994 NY CSA and 1995 CSA didn’t change a great deal: here is a comparison. It got a bit more hinky with the arrival of the Modern CSAs: here’s a comparison between the 1995 and the 2016 VM CSAs.

Whereas the OG CSAs are kind of laissez faire — yo, dudes, put whatever you like in the elections para, you know — because a credit support annex back then was a bit of a wheeze, and no-one really understood it — in the intervening 21 years ISDA’s crack drafting squad™ got all nudgy.

So they say “every business day” unless you specify something else and, like, you are not going to specify something else, are you, because regulatory rules say it has to be every day.

Note also the introduction in 2016 of a Valuation Date Location: each party gets to choose one, being its own hometown. If you’re off dancing the maypole, or whatever collective cultural tradition you follow in your part of the world (In the Czech Republic, I am told, at Easter the boys chase the girls round the kitchen table with riding crops. Which sounds kind fun), then you should have no fear you’ll get called on to make a collateral transfer.

Valuation Time

The Valuation Time definition loosens up somewhat in the VM CSAs. More discussion of that below, and here is a comparison, for the fiendishly interested.

Summary

Valuation Date

Each day on which you can expect to exchange variation margin under a Credit Support Annex, which is:

1. 1994 NY CSA and 1995 CSA: Whatever you specified in your elections paragraph and, the older your document is, the more likely it is to be an arbitrary and quite unnervingly long period.
2. 2016 NY VM CSA and 2016 VM CSA: Unless otherwise specified in the elections paragraph, every day on which you’re both in the office in at least one of your Valuation Date Locations. Should the parties specify otherwise in their elections? No. Why would they? Will they? Experience suggests, for a dogged minority, they just might. Don’t be that guy.

Valuation Time

A bit of an evolution in the concept of the Valuation Time between the OG and VM versions of the CSA.

In the OG versions, the Valuation Time defaulted to one of close of business on the Valuation Date — which figures, intuitively, or close of business on the Local Business Day immediately before the Valuation Date — which doesn’t, as a matter of cold semantic logic, but okay, the time by reference to which you calculate a value, does not have to be on the same day that you actually calculate it, as long as it has already happened. Fine. In fact, when you think about it the Valuation Time being at the close of business on a Valuation Date implies that the point in the day at which you are actually performing your valuation calculations is, well, after closing time: the bell has rung and everyone has started drifting home. That doesn’t really make a lot of sense either. But hey ho.

In the VM CSAs, the Valuation Time is quite a lot looser. If you haven’t fiddled with it, the Valuation Time is the Valuation Agent’s normal time for calculating end-of-day valuations — which need not, therefore, be the actual end of the day — or any other commercially reasonable time “on the relevant day”. “Day”, not “date”, and not Valuation Date, so it could still be the preceding day, but logically it doesn’t make a lot of sense (we think) to presume it could be afterward.

Premium content

Here the free bit runs out. Subscribers click 👉 here. New readers sign up 👉 here and, for ½ a weekly 🍺 go full ninja about all these juicy topics 👇

• JC’s “nutshell” summary of the clause
• Background reading and long-form essays
• Four-dimensional chess associated with the Valuation and settlement process
• Transfer timings — a run-down

See also

• Settlement Day
• Regular Settlement Day