Template:Failure to pay procedure: Difference between revisions

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So: once you have a clear, notified {{{{{1}}}|Failure to Pay or Deliver}}, you have to wait ''at least'' one and possibly three or more {{{{{1}}}|Local Business Day}}s before doing anything about it. Therefore you are on tenterhooks until the [[close of business]] '''T+2''' {{{{{1}}}|LBD}}s (standard {{2002ma}}), or '''T+4''' {{isda92prov|LBD}}s (standard {{1992ma}}).  
So: once you have a clear, notified {{{{{1}}}|Failure to Pay or Deliver}}, you have to wait ''at least'' one and possibly three or more {{{{{1}}}|Local Business Day}}s before doing anything about it. Therefore you are on tenterhooks until the [[close of business]] '''T+2''' {{{{{1}}}|LBD}}s (standard {{2002ma}}), or '''T+4''' {{isda92prov|LBD}}s (standard {{1992ma}}).  


===An {{{{{1}}}|Early Termination Date}}: ''Now'' you can send your Section {{{{{1}}}|6(a)}} notice===
At the expiry of this [[grace period]], you finally have a fully operational {{{{{1}}}|Event of Default}}. Now Section {{{{{1}}}|6(a)}} gives you the right, by ''not more than 20 days’ notice''<ref>See discussion on at Section {{{{{1}}}|6(a)}} about the silliness of that time limit.</ref> to designate an {{{{{1}}}|Early Termination Date}} for all outstanding {{isdaprov|Transaction}}s.  
At the expiry of this [[grace period]], you finally have a fully operational {{{{{1}}}|Event of Default}}. Now Section {{{{{1}}}|6(a)}} gives you the right, by ''not more than 20 days’ notice''<ref>See discussion on at Section {{{{{1}}}|6(a)}} about the silliness of that time limit.</ref> to designate an {{{{{1}}}|Early Termination Date}} for all outstanding {{isdaprov|Transaction}}s.  


So, at some point in the next twenty days there will be a final reckoning and one Party will pay the other the {{isdaprov|Early Termination Amount}}.<ref>By a striking oversight, not actually so named in the {{1992ma}}.</ref>But we have a ways to go before we even know what that amount will be. But observe: the payment date is now locked in. Time to get on your skates.
So, at some point in the next twenty days there will be a final reckoning and one Party will pay the other the {{isdaprov|Early Termination Amount}}.<ref>By a striking oversight, not actually so named in the {{1992ma}}.</ref>But we have a ways to go before we even know what that amount will be. But observe: the payment date is now locked in. Time to get on your skates.


For this we go to Section {{{{{1}}}|6(e)}}, noting as we fly over it, that Section {{{{{1}}}|6(c)}} reminds us [[for the avoidance of doubt]] that even if the {{{{{1}}}|Event of Default}} which triggers the {{{{{1}}}|Early Termination Date}} evaporates in the meantime — these things happen, okay? — yon {{{{{1}}}|Defaulting Party}}’s goose is still irretrievably cooked. For it not to be (i.e., if [[Credit department|Credit]] suddenly gets executioner’s remorse and wants to let the {{{{{1}}}|Defaulting Party}} off), the {{{{{1}}}|Non-defaulting Party}} will have to expressly terminate the close-out process, preferably by written notice. There’s an argument — though it is hard to picture the time or place on God’s green earth where a {{{{{1}}}|Defaulting Party}} would make it — that cancelling an in-flight close out is no longer exclusively in the {{{{{1}}}|Defaulting Party}}’s gift, and requires the {{{{{1}}}|NDP}}’s consent. It would be an odd, self-harming kind of {{{{{1}}}|Defaulting Party}} that would run ''that'' argument unless the market was properly gyrating.
===Determine {{{{{1}}}|Close-out Amount}}s<ref name="close out amounts">Or their equivalents under the {{1992ma}}, of course.</ref>===
*'''Determining {{isdaprov|Close-out Amount}}s'''<ref>Or their equivalents under the {{1992ma}}, of course.</ref>: There is a bit of a [[chicken licken]]-and-egg situation here as you must now ascertain termination values for the {{{{{1}}}|Terminated Transaction}}s as of the {{isdaprov|Early Termination Date}} per the methodology set out in Section {{{{{1}}}|6(e)(i)}}, but you can’t really work out their [[mark-to-market]] values for that date at any time ''before'' that date, unless you are able to see into the future or something. Anyway, that’s a conundrum for your [[Trader|trading]] people (and in-house [[Metaphysics|metaphysicians]]) to deal with and it need not trouble we [[Legal Eagles|eagles of the law]]. For our purposes, the trading and risk people need to come up with {{isdaprov|Close-out Amount}}s<ref>See previous footnote.</ref> for all outstanding {{{{{1}}}|Transaction}}s. Once they have done that you are ready for your Section {{{{{1}}}|6(e)}} notice.
Now armed with our crystalised {{{{{1}}}|Failure to Pay or Deliver}} {{{{{1}}}|Event of Default}} and with an {{{{{1}}}|Early Termination Date}} to target, we go directly to Section {{{{{1}}}|6(e)}}, noting as we fly over it, that Section {{{{{1}}}|6(c)}} reminds us [[for the avoidance of doubt]] that even if the {{{{{1}}}|Event of Default}} which triggers the {{{{{1}}}|Early Termination Date}} evaporates in the meantime — these things happen, okay? — yon {{{{{1}}}|Defaulting Party}}’s goose is still irretrievably cooked.<ref>If [[Credit department|Credit]] suddenly gets executioner’s remorse and wants to let the {{{{{1}}}|Defaulting Party}} off), the {{{{{1}}}|Non-defaulting Party}} will have to expressly terminate the close-out process, preferably by written notice. There’s an argument — though it is hard to picture the time or place on God’s green earth where a {{{{{1}}}|Defaulting Party}} would make it — that cancelling an in-flight close out is no longer exclusively in the {{{{{1}}}|Defaulting Party}}’s gift, and requires the {{{{{1}}}|NDP}}’s consent. It would be an odd, self-harming kind of {{{{{1}}}|Defaulting Party}} that would run ''that'' argument unless the market was properly gyrating.</ref>
*'''{{{{{1}}}|Early Termination Amount}}''': Your inhouse metaphysicians having calculated your {{isdaprov|Close-out Amount}}s, you must assemble all the values into an {{{{{1}}}|Early Termination Amount}}.<ref>Or, in the {{1992ma}}’s estimable prose, “the amount, if any, payable in respect of an {{isdaprov|Early Termination Date}} and determined pursuant to this Section”.</ref>
 
One must now ascertain termination values for the {{{{{1}}}|Terminated Transaction}}s as of the {{isdaprov|Early Termination Date}} per the methodology set out in Section {{{{{1}}}|6(e)(i)}}.
 
There is a bit of a [[chicken licken]]-and-egg situation here as you can’t really work out their [[mark-to-market]] values for that date at any time ''before'' that date, unless you are able to see into the future or something. Anyway, that’s a conundrum for your [[Trader|trading]] people (and in-house [[Metaphysics|metaphysicians]]) to deal with and it need not trouble we [[Legal Eagles|eagles of the law]]. For our purposes, the trading and risk people need to come up with {{isdaprov|Close-out Amount}}s for all outstanding {{{{{1}}}|Transaction}}s. Once they have done that you are ready for your Section {{{{{1}}}|6(e)}} notice.
 
==={{{{{1}}}|Early Termination Amount}}===
Your inhouse metaphysicians having calculated your {{isdaprov|Close-out Amount}}s,<ref name="close out amounts"/> you must assemble all the values into an {{{{{1}}}|Early Termination Amount}}.<ref>Or, in the {{1992ma}}’s estimable prose, “the amount, if any, payable in respect of an {{isdaprov|Early Termination Date}} and determined pursuant to this Section”.</ref>
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