Template:Csa transaction versus credit support document: Difference between revisions
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==== | ====Deep ontological differences between NY and English law versions==== | ||
Unlike a [[title transfer]] {{ukcsa}} which is expressed to be a {{isdaprov|Transaction}} under the {{isdama}}, the {{nyvmcsa}} is ''not'': it is instead a “{{isdaprov|Credit Support Document}}”: a standalone [[collateral]] arrangement that stands aloof and apart from the {{isdama}} and all its little diabolical {{isdaprov|Transaction}}s. The reason for this is — spoiler: it’s not a very good one — because while a {{ukcsa}}, by being a {{ttca}}, necessarily reverses the [[indebtedness]] between the parties outright, an {{nyvmcsa}} (and, for that matter, an [[English law]] {{csd}}) does not: it only provides a [[security interest]]. The [[in-the-money]] counterparty is still [[in-the-money]]. It is just ''secured'' for that [[exposure]]. The outright {{isdaprov|exposure}} between the parties does not change as a result of the pledge of credit support. | Unlike a [[title transfer]] {{ukcsa}} which is expressed to be a {{isdaprov|Transaction}} under the {{isdama}}, the {{nyvmcsa}} is ''not'': it is instead a “{{isdaprov|Credit Support Document}}”: a standalone [[collateral]] arrangement that stands aloof and apart from the {{isdama}} and all its little diabolical {{isdaprov|Transaction}}s. The reason for this is — spoiler: it’s not a very good one — because while a {{ukcsa}}, by being a {{ttca}}, necessarily reverses the [[indebtedness]] between the parties outright, an {{nyvmcsa}} (and, for that matter, an [[English law]] {{csd}}) does not: it only provides a [[security interest]]. The [[in-the-money]] counterparty is still [[in-the-money]]. It is just ''secured'' for that [[exposure]]. The outright {{isdaprov|exposure}} between the parties does not change as a result of the pledge of credit support. | ||
This is magical, bamboozling stuff — deep ISDA lore — and, at least where [[rehypothecation]] is allowed under Paragraph {{nyvmcsaprov|6(c)}} of a {{nyvmcsa}} — it pretty much always is — it serves no real purpose, because even though you ''say'' you are only pledging the collateral, in the the greasy light of commercial reality, from the moment the {{nyvmcsaprov|Secured Party}} [[rehypothecate]]s your pledged assets away into the market, dear {{nyvmcsaprov|Pledgor}} you ''have'' transferred your title outright. | This is magical, bamboozling stuff — deep ISDA lore — and, at least where [[rehypothecation]] is allowed under Paragraph {{nyvmcsaprov|6(c)}} of a {{nyvmcsa}} — it pretty much always is — it serves no real purpose, because even though you ''say'' you are only pledging the collateral, in the the greasy light of commercial reality, from the moment the {{nyvmcsaprov|Secured Party}} [[rehypothecate]]s your pledged assets away into the market, dear {{nyvmcsaprov|Pledgor}} you ''have'' transferred your title outright. | ||
Latest revision as of 13:38, 19 June 2024
Deep ontological differences between NY and English law versions
Unlike a title transfer English law CSA which is expressed to be a Transaction under the ISDA Master Agreement, the 2016 NY Law VM CSA is not: it is instead a “Credit Support Document”: a standalone collateral arrangement that stands aloof and apart from the ISDA Master Agreement and all its little diabolical Transactions. The reason for this is — spoiler: it’s not a very good one — because while a English law CSA, by being a title transfer collateral arrangement, necessarily reverses the indebtedness between the parties outright, an 2016 NY Law VM CSA (and, for that matter, an English law English law CSD) does not: it only provides a security interest. The in-the-money counterparty is still in-the-money. It is just secured for that exposure. The outright exposure between the parties does not change as a result of the pledge of credit support.
This is magical, bamboozling stuff — deep ISDA lore — and, at least where rehypothecation is allowed under Paragraph 6(c) of a 2016 NY Law VM CSA — it pretty much always is — it serves no real purpose, because even though you say you are only pledging the collateral, in the the greasy light of commercial reality, from the moment the Secured Party rehypothecates your pledged assets away into the market, dear Pledgor you have transferred your title outright.