Template:M summ 2002 ISDA Local Business Day

“General Business Day” and “Local Business Day”

The defined term General Business Day appears in only one place in the ISDA Master Agreement: the definition of Local Business Day. It is this:

“General Business Day” means a day on which commercial banks are open for general business (including dealings in foreign exchange and foreign currency deposits).

Thereby, a short definition used to prop up a longer one. You might think “business day” is kind of a clear-enough, well understood-enough term that it shouldn’t need to be defined at all, but that is not how ISDA’s crack drafting squad™ operates.

Local Business Day and Local Delivery Day

What is the difference between a “Local Business Day” and a “Local Delivery Day”?

Local Business Day is a lot more fiddly, and context dependent, for one thing. As per our nutshell summary, what counts as a Local Business Day depends on who is asking: for performing general obligations it looks to the Transaction Confirmation; for Waiting Periods it depends where the triggering event occurs, for payments it depends where the account is located, for communications it depends on the location of the recipient.

A Local Delivery Day — which comes up only in when considering whether one has failed to deliver a non-cash security of some kind (Section 5(a)(i)) or, even though ostensibly having failed to dliver it, you haven’t yet technically failed to deliver it, on account of an intervening Illegality or Force Majeure which has triggered a Waiting Period before that failure to deliver becomes an official Failure to Pay or Deliver.

CSA relevance

Local Business Day is also defined in the 1995 CSA (and its successors, dependents, friends and relations), as it the related term Regular Settlement Day. Which makes for fun, as we shall see:

How the business days work for demands under a Credit Support Annex

1. Valuation and demand: A 1995 CSA may demand a 1995 CSA (Para 1995 CSA) or a 1995 CSA Para 1995 CSA) “on or promptly following a 1995 CSA”.
2. Valuation Date: A “1995 CSA” means a day on which banks are open in at least one 1995 CSA for each party.
   1. Each party can specify however many 1995 CSAs it likes.
   2. Tip: the fewer you specifiy, the greater the chance none will be open on a given day, and you will be excused from a margin call, so don’t overdo it. One should be ample.
3. Settlement: Any 1995 CSA or 1995 CSA must be settled (Para 1995 CSA) by the close of business on the 1995 CSA relating to the date such demand is received (if received before the 1995 CSA (spoiler: usually 11 am, noon or 1pm)), or the 1995 CSA relating to the day after the date such demand is received (if received after the 1995 CSA).
4. Regular Settlement Day: A “1995 CSA” means the same 1995 CSA — careful: as defined in the 1995 CSA, not the ISDA Master Agreement — on which the demand is made.
5. Local Business Day: A “1995 CSA” (under the 1995 CSA) means, in the case of notices, a day on which banks are open in the address for the notice most recently specified by the Recipient. What if demand is made on a day that is not a 1995 CSA? Simple: by dint of Section 12 of the ISDA Master Agreement, the notice will be deemed given on the next Local Business Day (as defined in the ISDA Master Agreement, not the 1995 CSA).

Easy.