Template:Isda Automatic Early Termination comp: Difference between revisions

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{{isdacomparisons|83262|40195|40196}}
{{isdacomparisons|83262|40195|40196}}
{{{{{1}}}|Automatic Early Termination}} first appears in the {{1992ma}}. 1987 was still early doors in the life of the over-the-counter derivatives market — the first swap was only six years earlier, remember — and the Basel Committee murmurings about the capital risks posed by infinite leverage were only really just starting to take flight. It can’t have occurred to {{icds}} that an insolvency regime might treat contractual provisions with less respect the moment ''after'' a formal bankruptcy than it did the moment before.
{{drop|A|utomatic Early Termination}} first appeared as a ''named'' term in the {{1992ma}}. It did feature, uncredited, in the {{1987ma}}, though in this larval stage it was a blunt instrument indeed.  


The language of {{{{{1}}}|6(a)}} does not change between the {{1992ma}} and the {{2002ma}}. ATE only applies on certain limbs of the definition of {{{{{1}}}|Bankruptcy}}.
By 1992, the [[’squad]] had made some key adjustments:
{{gb|They made it an option you could elect in the Schedule, and typically only would elect against counterparties in one of the few jurisdictions where the local [[netting opinion]] required it.<li>
They narrowed down its scope, by excluding from its ambit limbs (2) ([[cashflow insolvency]]) and (7) (contractual sequestration) of the {{{{{1}}}|Bankruptcy}} definition.<li>
They also officially labelled it “{{{{{1}}}|Automatic Early Termination}}”.}}
 
Thereafter they did not change the language of {{{{{1}}}|6(a)}} between the {{1992ma}} and the {{2002ma}}, though there ''was'' an adjustment to the definition of what counted as a “{{{{{1}}}|bankruptcy petition}}” under Section {{{{{1}}}|5(a)(vii)(4)}} of the {{{{{1}}}|Bankruptcy}} definition, to narrow down the applicability of the problematic [[grace period]]. Problematic for reasons we discuss at length in the premium section (see {{pjchotlink|Formal bankruptcy petitions and grace periods}}).

Latest revision as of 09:23, 12 October 2024

Redlines

Discussion

Automatic Early Termination first appeared as a named term in the 1992 ISDA. It did feature, uncredited, in the 1987 ISDA, though in this larval stage it was a blunt instrument indeed.

By 1992, the ’squad had made some key adjustments:

  • They made it an option you could elect in the Schedule, and typically only would elect against counterparties in one of the few jurisdictions where the local netting opinion required it.
  • They narrowed down its scope, by excluding from its ambit limbs (2) (cashflow insolvency) and (7) (contractual sequestration) of the {{{{{1}}}|Bankruptcy}} definition.
  • They also officially labelled it “{{{{{1}}}|Automatic Early Termination}}”.

Thereafter they did not change the language of {{{{{1}}}|6(a)}} between the 1992 ISDA and the 2002 ISDA, though there was an adjustment to the definition of what counted as a “{{{{{1}}}|bankruptcy petition}}” under Section {{{{{1}}}|5(a)(vii)(4)}} of the {{{{{1}}}|Bankruptcy}} definition, to narrow down the applicability of the problematic grace period. Problematic for reasons we discuss at length in the premium section (see Formal bankruptcy petitions and grace periods).

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