Preamble - NY VM CSA Provision: Difference between revisions

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{{Csa transaction versus credit support document}}

Revision as of 23:07, 21 January 2020

2016 NY VM CSA Anatomy™


In a Nutshell Section preamble:

2016 Credit Support Annex for Variation Margin (VM)

dated as of ……………………….
to the Schedule to the ISDA Master Agreement
dated as of ...........................................................
between
........................................................ and ....................................................
(“Party A”) (“Party B”)


This Annex is part of the Schedule to the Agreement described above. It is a Credit Support Document for both parties.
The parties agree:
view template

2016 NY VM CSA full text of Section preamble:

2016 Credit Support Annex for Variation Margin (VM)

dated as of ……………………….
to the Schedule to the ISDA Master Agreement
dated as of ...........................................................
between
........................................................ and ....................................................
(“Party A”) (“Party B”)


This Annex supplements, forms part of, and is subject to, the above-referenced Agreement, is part of its Schedule and is a Credit Support Document under this Agreement with respect to each party.
Accordingly, the parties agree as follows:—
view template

Related Agreements
Click here for the text of Section preamble in the 1994 New York law CSA
Click here for the text of Section preamble in the 1995 English Law CSA
Click here for the text of Section preamble in the 2016 English Law VM CSA
Comparisons
Template:2nycsadiff preamble
Template:Nycsadiff preamble
1995 CSA and 2016 VM CSA: click for comparison

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Differences between CSA versions

Template:Nycsa capsule preamble

Deep ontological differences between NY and English law versions

Unlike a title transfer English law CSA which is expressed to be a Transaction under the ISDA Master Agreement, the 2016 NY Law VM CSA is not: it is instead a “Credit Support Document”: a standalone collateral arrangement that stands aloof and apart from the ISDA Master Agreement and all its little diabolical Transactions. The reason for this is — spoiler: it’s not a very good one — because while a English law CSA, by being a title transfer collateral arrangement, necessarily reverses the indebtedness between the parties outright, an 2016 NY Law VM CSA (and, for that matter, an English law English law CSD) 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 as a result of the pledge of credit support.

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.