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.
{{{{{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 posed to the ISDA’s carefully machined close-out and netting mechanics.  
{{{{{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 posed to the ISDA’s carefully machined close-out and netting mechanics.  


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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 {{{{{1}}}|bankruptcy petition}} in Section {{{{{1}}}|5(a)(vii)(4)}}, to narrow down the applicability of the [[grace period]].

Revision as of 09:45, 3 October 2024

Redlines

Discussion

{{{{{1}}}|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: it was mandatory and applied against every party in the case of any Bankruptcy event, regardless of the risk that party’s insolvency regime posed to the ISDA’s carefully machined close-out and netting mechanics.

The 1987 ISDA unquestionably overdid it: its generally ham-fisted approach to netting is one of many reasons most people have for a long time given it a wide berth.

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 a counterparty in one of the few jurisdictions where the netting opinion required it.
  • They narrowed down its scope, by excluding limbs (2) (cashflow insolvency) and (7) (contractual sequestration) of the {{{{{1}}}|Bankruptcy}} definition from its ambit.
  • 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 {{{{{1}}}|bankruptcy petition}} in Section {{{{{1}}}|5(a)(vii)(4)}}, to narrow down the applicability of the grace period.

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