Template:Csa transaction versus credit support document: Difference between revisions
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===Profound onotological differences=== | ===Profound onotological differences=== | ||
Unlike a [[title transfer]] {{ukcsa}}, the {{nyvmcsa}} is ''not'' a Transaction under the {{isdama}}, but is in fact 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, and the reason for ''that'' is — and, spoiler: it’s not a very good one — because while a {{ukcsa}}, by being a {{ttca}}, reverses the [[indebtedness]] claim outright, an {{nyvmcsa}} (and, for that matter, an English law Credit Support Deed) 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. | Unlike a [[title transfer]] {{ukcsa}}, the {{nyvmcsa}} is ''not'' a {{isdaprov|Transaction}} under the {{isdama}}, but is in fact 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, and the reason for ''that'' is — and, spoiler: it’s not a very good one — because while a {{ukcsa}}, by being a {{ttca}}, reverses the [[indebtedness]] claim outright, an {{nyvmcsa}} (and, for that matter, an English law Credit Support Deed) 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. | ||
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. <ref> | 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. <ref> | ||
Revision as of 15:02, 16 January 2020
Profound onotological differences
Unlike a title transfer English law CSA, the 2016 NY Law VM CSA is not a Transaction under the ISDA Master Agreement, but is in fact a Credit Support Document: a standalone collateral arrangement that stands aloof and apart from the ISDA Master Agreement and all its little diabolical Transactions, and the reason for that is — and, spoiler: it’s not a very good one — because while a English law CSA, by being a title transfer collateral arrangement, reverses the indebtedness claim outright, an 2016 NY Law VM CSA (and, for that matter, an English law Credit Support Deed) 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.
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. <ref>