Long-form confirmation

ISDA Anatomy™ →Go uptown Index: Click ᐅ to expand: ISDA Navigation See ISDA Comparison for a comparison between the 1992 ISDA and the 2002 ISDA. The Varieties of ISDA Experience Subject 2002 (wikitext) 1992 (wikitext) 1987 (wikitext) Preamble Pre Pre Pre Interpretation 1 1 1 Obligns/Payment 2 2 2 Representations 3 3 3 Agreements 4 4 4 EODs & Term Events 5 Events of Default: FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events: Illegality • FM • Tax Event • TEUM • CEUM • ATE 5 Events of Default: FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events: Illegality • Tax Event • TEUM • CEUM • ATE 5 Events of Default: FTPD • Breach • CSD • Misrep • DUSS • Cross Default • Bankruptcy • MWA Termination Events: Illegality • Tax Event • TEUM • CEUM Early Termination 6 Early Termination: ET right on EOD • ET right on TE • Effect of Designation • Calculations; Payment Date • Payments on ET • Set-off 6 Early Termination: ET right on EOD • ET right on TE • Effect of Designation • Calculations • Payments on ET • Set-off 6 Early Termination: ET right on EOD • ET right on TE • Effect of Designation • Calculations • Payments on ET Transfer 7 7 7 Contractual Currency 8 8 8 Miscellaneous 9 9 9 Offices; Multibranch Parties 10 10 10 Expenses 11 11 11 Notices 12 12 12 Governing Law 13 13 13 Definitions 14 14 14 Schedule Schedule Schedule Schedule Termination Provisions Part 1 Part 1 Part 1 Tax Representations Part 2 Part 2 Part 2 Documents for Delivery Part 3 Part 3 Part 3 Miscellaneous Part 4 Part 4 Part 4 Other Provisions Part 5 Part 5 Part 5 Tell me more Sign up for our newsletter — or just get in touch: for ½ a weekly 🍺 you get to consult JC. Ask about it here.

A long form confirmation, or “LFC”, generally refers to the documentation for a financial transaction between two parties which have not (yet) formally signed a master agreement for that type of transaction. Instead they document the trade on a “long form” which deems a basic version of the relevant master agreement be in existence between the parties for the purposes of the transaction.

This used to be totally cool but for many years the sober and upright legal fraternity have frowned madly on this format, and it is now shunned, marginalised and cast out to the fringes of polite financial society. Particularly popular among lazy writers like Hunter Barkley (yes - he of the Opco Boone series), it frequently features as a McGuffin in the Finance Fiction canon and, when we get around to it, will feature in our FWMD Top Trumps catalog.

Example: ISDA LFC

For example, an ISDA LFC incorporates by reference the ISDA Master Agreement, without a Schedule, pulling in the provisions in the ISDA Master Agreement concerning termination and close-out, representations, so on. So - you have an ISDA without all the bother, right?

In hindsight, a revolutionary idea, whose time will once again come, we think. But for the time being the cottage industrial complex of the ISDA negotiation world is managing to hold off the baying hounds of common sense, and we are going through the pantomime of separately negotiating what ought to be an utterly standard market contract.

Drawbacks

While LFCs “do the job”, they're not ideal for a number of reasons:

• They incorporate the basic ISDA protections whcih are in the preprinted ISDA Master Agreement. However, most counterparties significantly enhance these protections with additional provisions and elections in the Schedule and with a 1995 CSA. The standard form LFC does not capture any such enhancements, and does not have a 1995 CSA.
• The standard LFC deems eachy separate transaction to be executed under s “stand-alone” ISDA Master Agreement. Without additional amendment, there would not be cross-transactional close-out netting between two LFCs exectuted with the same party (though this language may be overcome provided there is some "aggregation language" in every LFC, and every LFC has the same designated Termination Currency).

See also

• FWMD Top Trumps