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| ===={{isdaprov|Failure to pay}} procedure====
| | JC’s has updated the step-by-step guide to closing out an ISDA and it is now {{premium}}. You can access it '''[[pjc:Close out|here]]'''. |
| Terminating the {{isdama}} on this ground requires:
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| *'''Failure''': A [[failure to pay]], on day T;
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| *'''Notice of failure''': The innocent party to give notice of the failure (which, [[Q.E.D.]], can be validly given ''only after'' [[close of business]] on the due date for payment or delivery (until then, the guilty party isn't technically “guilty”) and, by dint of Section {{isdaprov|12(a)}} ({{isdaprov|Notices}}), the notice will only be deemed effective on the following business day, T+1.
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| :*'''Spod’s note''': This notice requirement is key from a {{isdaprov|Cross Default}} perspective<ref>If you have been indelicate enough to widen the scope of your [[cross default]] to include [[derivatives]], that is.</ref>: if you don’t have it, ''any'' failure to pay under your {{isdama}}, however innocuous — even an operational oversight — automatically counts as an {{isdaprov|Event of Default}}, and gives a different person to the right to close ''their'' {{isdama}} with the {{isdaprov|counterparty}} because of it defaulted to you, even though (a) the counterparty hasn't defaulted to them, and (b) you have decided not to take any action against the counterparty yourself.
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| *'''[[Grace Period]]''': After the notice of failure is delivered, the grace period must have expired (this depends on the ISDA edition you’re using: '''one''' under the {{2002isda}}; and '''three''' under the {{1992isda}}, and check also Part 5 of the ISDA {{isdaprov|Schedule}} to see if it has been amended specifically for the counterparty. <br>
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| Therefore close of business T+2 (standard {{2002ma}}), T+4 (standard {{1992ma}})
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| *'''Section {{isdaprov|6(e)}} notice''': The {{isdaprov|notice of termination}} may only be served after close of business at the expiry of the grace period, so therefore the first day on which a termination notice following a failure to pay {{isdaprov|Event of Default}} can be effective under an ISDA is T+3 ({{2002isda}}) or T+5 {{1992isda}}.
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JC’s has updated the step-by-step guide to closing out an ISDA and it is now premium content. You can access it here.