|
|
| (9 intermediate revisions by the same user not shown) |
| Line 1: |
Line 1: |
| The actual wording is in the info box lower down on the right-hand side, but you may find it easier to read the nutshell summary, since in its 2016 version CSA ISDA not only passed up the opportunity to make this unused-in-practice language simpler, but bloody-mindedly made it worse, by providing anally-retentive alternatives for {{2002isda}} and {{1992isda}} close-out methodologies. Which is just spectacular.
| | #redirect[[Dispute Resolution - CSA Provision]] |
| {{Nuts|4(a)|1995 CSA}}<br>
| |
| {{csaprov|Disputed Calculations or Valuations}} is a topic that could unfurl like the flower of a deadly insect-eating nightshade if you let it. DON’T LET IT.
| |
| {{fullanatopen|csa|
| |
| {{csasnap|4(a)|1995}}
| |
| {{csasnap|4(a)|2016}}
| |
| }}
| |
| ====What can be disputed?====
| |
| The dispute can be as to one of two things:
| |
| *The {{csaprov|Value}} of posted (or to-be-transferred) {{csaprov|Eligible Credit Support}}; or
| |
| *The {{isdaprov|Transaction}} {{csaprov|Value}} (when calculating {{csaprov|Exposure}}).
| |
| =====Value of {{csaprov|Credit Support}}=====
| |
| Let's take the easy one first: {{csaprov|Eligible Credit Support}}. If you are a smart sort of fellow who has moved onto a cash-only single-currency {{2016csa}} then there’s not really much to argue about. What is the {{csaprov|Value}}, in the {{csaprov|Base Currency}}, of an amount in the {{csaprov|Base Currency}}?<ref>Hint: it’s a trick question.</ref>
| |
| | |
| ====={{isdaprov|Transaction}} {{csaprov|Exposure}}=====
| |
| The {{isdaprov|Transaction}} {{isdaprov|Exposure}} has — potentially — a different complexion. While some asset classes ([[FX]], [[synthetic equity]]) are pretty observable and, in the same way, there is not much to argue about, others are not. The less liquid a transaction is, the less likely the broker is to refuse any dispute rights when carrying out its {{isdaprov|Calculation Agent}} function under the {{tag|ISDA}}.
| |
| | |
| So doesn’t the self-help valuation model under the CSA drive a [[Coach & Horses|coach and horses]] through the carefully constructed {{isdaprov|Calculation Agent}} language on which the [[broker]] counterparty has just insisted, to the point of threatening to die in a ditch about it?
| |
| | |
| It may seem so, but in practice no.
| |
| *Firstly, the dispute mechanism in the CSA, while fulsome, reflects the uncynical attitude of yesteryear in its aspirations for what third party {{isdaprov|Reference Market-Makers}} will be prepared to do to help a fellow market participant out.
| |
| *It depends on the better angels of a {{isdaprov|Reference Market-maker}}’s nature — neigh, those of ''four'' of the blighters — in providing [[firm quotation]]s to be dissected, arithmetically averaged and arranged for the delight of all. But a moment’s reflection should tell you that {{isdaprov|Reference Market-maker}}s don’t ''have'' a better nature. They are certain not to provide a quote, which brings them no benefit (they can’t get a trade out of it) and saddles them with risk — albeit only the [[Chicken Licken]] sort of risk that [[Mediocre lawyer|assiduous attorneys]] like to busy themselves, namely the fear that one’s well-meaning [[bad faith]]<ref>I ''know'' this is a contradiction in terms.</ref> or [[negligence]] has somehow caused compensable harm to the interests of another market participant<ref>The best defence to such an action, if you were wondering, is not to act in bad faith and to be competent in what you do. But that’s as may be: [[Chicken Licken]] is really only the excuse one wheels out for not wasting time doing something for which you get no benefit.</ref>.
| |
| | |
| So all this careful language really boils down to “the party calling for collateral decides” which seems wildly one-sided until you realize that a trading relationship is — well — a ''relationship'', and absent a material risk of outright failure (in which case, the value of mark-to- market exposures are a problem only when your counterpart has failed to honour them), the lure of a continued trading relationship, professional courtesy, and being a [[good egg]] are the practical mitigants against unconsiounable behaviour.
| |
| | |
| Of course, none of these mitigants gives much scope for legal intercession, so a [[Mediocre lawyer|good lawyer]] tends to cast aspersions on them.
| |
| ''[to be continued]''
| |
| | |
| | |
| | |
| {{ref}}
| |