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| [[Specified Transaction - ISDA Provision|Used]] in the {{isdaprov|Default under Specified Transaction}} {{isdaprov|Event of Default}} under Section {{isdaprov|5(a)(v)}} — fondly known to those in the know as “{{isdaprov|DUST}}”.
| | {{isda Specified Transaction summ|isdaprov}} |
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| ===Credit support annexes?===
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| [[Specified Transaction - 1992 ISDA Provision|We]] are going to go out on a limb here and say that little parenthetical “(including an agreement with respect to any such transaction)” is, if not deliberately ''designed'' that way, is at least ''[[calculated]]''<ref>In the sense of being “likely”.</ref> to capture failures under a [[credit support annex]] which, yes, is a {{isdaprov|Transaction}} under an {{isdama}} but no, is not really a swap or anything really like one.
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| There is enough chat about {{isdaprov|Credit Support Provider}}s (yes, yes, the counterparty itself is of course not a {{isdaprov|Credit Support Provider}}) to make us think, on a [[fair, large and liberal]] interpretation, that a default under the [[CSA]] to a swap {{isdaprov|Transaction}} is meant to be covered.
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| ===What?===
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| {{isdaprov|Specified Transaction}}s are those financial markets transactions between you and your counterparty ''other than those under the present {{isdama}}'', default under which justifies the wronged party closing out the present {{isda}}. “Specified Transactions” therefore specifically ''exclude'' {{isdaprov|Transactions}} under the ISDA itself for the sensible reason that a default under those is covered by by {{isdaprov|Failure to Pay or Deliver}} and {{isdaprov|Breach of Obligation}}. It might lead to a perverse result if misadventure under an {{isdama}} {{isdaprov|Transaction}} which did not otherwise amount to an {{isdaprov|Event of Default}}, became one purely as a result of the {{isdaprov|DUST}} provision, however unlikely that may be.
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| ===Enter the fiddlers===
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| ISDA’s verbal profligacy won’t stop enthusiastic credit officers amplifying the list even further, of course. What about [[precious metals|precious metal]] transactions? {{tag|Letter of credit}} reimbursement obligations? [[Indebtedness]]? What indeed?
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| ====An odd [[cognitive dissonance]]====
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| The framers of {{dust}} ''deliberately'' neglected to include [[borrowed money]] or [[indebtedness]], because these are picked up under the wider scope of the {{isdaprov|Cross Default}} provision which, of course, applies to indebtedness your counterparty owes to ''anyone'', not just you. Still, there is weirdness: {{isdaprov|Cross Default}} contemplates a {{isdaprov|Threshold Amount}} before it can be triggered. {{isdaprov|DUST}} doesn’t. So this leads to an odd gap:
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| *A (sub {{isdaprov|Threshold Amount}}) default under {{isdaprov|Specified Indebtedness}} ''between the two contractual parties'' would not entitle the innocent party to close out;
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| *A default under ''any other {{isdaprov|Specified Transaction}}'' between them ''would'' ''''' even if a smaller quantum of default'''''. This is kind of counterintuitive. If you were to define {{dust}} to include indebtedness, of course, you'd be covered.
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Used in the Default under Specified Transaction Event of Default under Section 5(a)(v) — fondly known to those in the know as “DUST”.
What?
Specified Transactions are those financial markets transactions between you and your counterparty other than those under the present ISDA Master Agreement, default under which justifies the wronged party closing out the present ISDA. “Specified Transactions” therefore specifically exclude Transactions under the ISDA itself for the sensible reason that a default under those is covered by by Failure to Pay or Deliver and Breach of Obligation. It might lead to a perverse result if misadventure under an ISDA Master Agreement Transaction which did not otherwise amount to an Event of Default, became one purely as a result of the DUST provision, however unlikely that may be.
Credit support annexes?
We are going to go out on a limb here and say that little parenthetical “(including an agreement with respect to any such transaction)” is, if not deliberately designed that way, is at least calculated[1] to capture failures under a credit support annex which, yes, is a Transaction under an ISDA Master Agreement but no, is not really a swap or anything really like one.
There is enough chat about Credit Support Providers (yes, yes, the counterparty itself is of course not a Credit Support Provider) to make us think, on a fair, large and liberal interpretation, that a default under the CSA to a swap Transaction is meant to be covered.
- ↑ In the sense of being “likely”.