Undead ISDA: Difference between revisions
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{{a|isda|[[File:William Blake - The Day of Judgment.jpg|450px|thumb|center|Uh-oh: honey — did I check the residual {{isdaprov|Cross Default}} risk on that old [[87 ISDA]]?]]}}The status of every defunct [[ISDA]] master agreement, once all {{isdaprov|transaction}}s have [[Terminated Transaction - ISDA Provision|terminated]], whether through the exigencies of a stressed [[close-out]], or simply through the [[entropy]] and general lassitude of a modern life in which many erstwhile [[ISDA]] devotees grew bored, or adversely regulated, and gave up on [[swap]]s, letting the last remaining {{isdaprov|transaction}}s to roll off and scamper, free, into the fragrant meadows of oblivion. | {{a|isda|[[File:William Blake - The Day of Judgment.jpg|450px|thumb|center|Uh-oh: honey — did I check the residual {{isdaprov|Cross Default}} risk on that old [[87 ISDA]]?]]}}The status of every defunct [[ISDA]] master agreement, once all {{isdaprov|transaction}}s have [[Terminated Transaction - ISDA Provision|terminated]], whether through the exigencies of a stressed [[close-out]], or simply through the [[entropy]] and general lassitude of a modern life in which many erstwhile [[ISDA]] devotees grew bored, or adversely regulated, and gave up on [[swap]]s, letting the last remaining {{isdaprov|transaction}}s to roll off and scamper, free, into the fragrant meadows of oblivion. | ||
For while you can terminate a ''{{isdaprov|Transaction}}'' under an {{isdama}} — and ''all of them'' — none of its printed forms envisages the parties terminating the [[master agreement]] ''itself''.<ref>There are reasons for this, but they are [[tedious]]: If you terminate the whole agreement, not just the {{isdaprov|Transaction}}s under it, then how are all those clever [[close out]] mechanics meant to work?</ref> It has no general [[no-fault termination]] provisions so, unless you and your counterparty can confect one — for that you will need communion wine, garlic, wooden stakes and so on — a discarded ISDA arrangement will just ''lie there'', locked-in, mute, transfixed, plastered to the infinite like some ghostly apparition, frozen at the [[event horizon]] of a [[black hole]] for ever — surviving, indefinitely, some believe even beyond the expiry of the very entities whose trading relationship it once described. | For while you can terminate a ''{{isdaprov|Transaction}}'' under an {{isdama}} — and ''all of them at once'', if things really come to that — none of its printed forms envisages the parties terminating the [[master agreement]] ''itself''.<ref>There are reasons for this, but they are [[tedious]]: If you terminate the whole agreement, not just the {{isdaprov|Transaction}}s under it, then how are all those clever [[close out]] mechanics meant to work?</ref> It has no general [[no-fault termination]] provisions so, unless you and your counterparty can confect one — for that you will need communion wine, garlic, wooden stakes and so on — a discarded ISDA arrangement will just ''lie there'', locked-in, mute, transfixed, plastered to the infinite like some ghostly apparition, frozen at the [[event horizon]] of a [[black hole]] for ever — surviving, indefinitely, some believe even beyond the expiry of the very entities whose trading relationship it once described. | ||
Some would say this is a non-point, as un-alive as the ISDA that presents it. For an ISDA under which there are no extant {{isdaprov|Transaction}}s carries no financial obligations and presents no risk. If no {{isdaprov|Transactions}} remain that can [[close out]], what earthly concern is it of either counterparty if there are notional obligations going unfulfulled? Who will take the point that you are no longer fulfilling your coverant to send your annual report within three months of its publication? Only a person yet to meet an internal auditor could ask that question. and besides, what of those meta-obligations? That two-edged {{isdaprov|Cross Default}} clause... ''could it'' ... ? | Some would say this is a non-point, as un-alive as the ISDA that presents it. For an ISDA under which there are no extant {{isdaprov|Transaction}}s carries no financial obligations and presents no risk. If no {{isdaprov|Transactions}} remain that can [[close out]], what earthly concern is it of either counterparty if there are notional obligations going unfulfulled? Who will take the point that you are no longer fulfilling your coverant to send your annual report within three months of its publication? Only a person yet to meet an internal auditor could ask that question. and besides, what of those meta-obligations? That two-edged {{isdaprov|Cross Default}} clause... ''could it'' ... ? | ||
Revision as of 14:59, 28 November 2019
The status of every defunct ISDA master agreement, once all transactions have terminated, whether through the exigencies of a stressed close-out, or simply through the entropy and general lassitude of a modern life in which many erstwhile ISDA devotees grew bored, or adversely regulated, and gave up on swaps, letting the last remaining transactions to roll off and scamper, free, into the fragrant meadows of oblivion.
For while you can terminate a Transaction under an ISDA Master Agreement — and all of them at once, if things really come to that — none of its printed forms envisages the parties terminating the master agreement itself.[1] It has no general no-fault termination provisions so, unless you and your counterparty can confect one — for that you will need communion wine, garlic, wooden stakes and so on — a discarded ISDA arrangement will just lie there, locked-in, mute, transfixed, plastered to the infinite like some ghostly apparition, frozen at the event horizon of a black hole for ever — surviving, indefinitely, some believe even beyond the expiry of the very entities whose trading relationship it once described.
Some would say this is a non-point, as un-alive as the ISDA that presents it. For an ISDA under which there are no extant Transactions carries no financial obligations and presents no risk. If no Transactions remain that can close out, what earthly concern is it of either counterparty if there are notional obligations going unfulfulled? Who will take the point that you are no longer fulfilling your coverant to send your annual report within three months of its publication? Only a person yet to meet an internal auditor could ask that question. and besides, what of those meta-obligations? That two-edged Cross Default clause... could it ... ?
You may laugh, but note only this: they who so haughtily wave such trifling concerns away yet still go quiet and will speak not of the Dark Lord.
See also
- Early Termination under the ISDA Master Agreement
- No-fault termination
- The Good Man
- The Dark Lord of the Swaps
References
- ↑ There are reasons for this, but they are tedious: If you terminate the whole agreement, not just the Transactions under it, then how are all those clever close out mechanics meant to work?