Template:Isda Automatic Early Termination comp: Difference between revisions

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{{isdacomparisons|83262|40195|40196}}
{{isdacomparisons|83262|40195|40196}}
The ISDA’s {{{{{1}}}|Automatic Early Termination}} provision — colloquially “{{{{{1}}}|AET}}”, but not to be confused with “{{{{{1}}}|ATE}}” or “{{{{{1}}}|ETA}}” — is triggered — sorry for the [[passive]], but there is no way around it — by certain {{{{{1}}}|Bankruptcy}} {{{{{1}}}|Events of Default}}. Not all of them, though. If it is triggered, {{{{{1}}}|AET}} [[deem]]s all {{{{{1}}}|Transactions}} under the {{isdama}} to be — or, in the case of a formal insolvency petition, ''to have just been'' — immediately terminated. In that last case, some creative warping of [[Lexophysics|lexophysical]] spacetime is required, which we will discuss at some length and with no small amount of wistful pedantry, in the premium section.  
{{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.  


{{{{{1}}}|Automatic 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: it was mandatory and applied against every party in the case of ''any'' Bankruptcy event, regardless of the risk that party’s insolvency regime would jeopardise the {{isdama}}’s carefully machined close-out and netting mechanics. This was unquestionably overkill, and yet another reason to steer clear of the {{1987ma}}.
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>
By the {{1992ma}}, the [[’squad]] had made some key adjustments:
They narrowed down its scope, by excluding from its ambit limbs (2) ([[cashflow insolvency]]) and (7) (contractual sequestration) of the {{{{{1}}}|Bankruptcy}} definition.<li>
{{gb|They made it an option you could elect in the Schedule, and typically only would elect against a counterparty in one of the few jurisdictions where the [[netting opinion]] required it.<li>
They narrowed down its scope, by excluding limbs (2) ([[cashflow insolvency]]) and (7) (contractual sequestration) of the {{{{{1}}}|Bankruptcy}} definition from its ambit.<li>
They also officially labelled it “{{{{{1}}}|Automatic Early Termination}}”.}}  
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}}.
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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