Template:M summ 2002 ISDA 9(h): Difference between revisions

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Created page with "Section {{isdaprov|9(h)}} deals with the various scenarios where interest — over and above stated Fixed Rate and Floating Rate Options might apply to legs of a Transaction — might apply to deferred and delayed payments under the ISDA. Those scenarios are: *'''Payment default''': Someone defaults on a money payment. *'''Delivery default''': Someone defaults on an asset delivery. *'''Non-default deferral''': Some other externality intervenes to make payment impossible,..."
 
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Section {{isdaprov|9(h)}} deals with the various scenarios where interest — over and above stated Fixed Rate and Floating Rate Options might apply to legs of a Transaction — might apply to deferred and delayed payments under the ISDA. Those scenarios are:
Section {{isdaprov|9(h)}} deals with the various scenarios where interest — over and above stated Fixed Rate and Floating Rate Options might apply to legs of a Transaction — might apply to deferred and delayed payments under the ISDA. Those scenarios are:
*'''Payment default''': Someone defaults on a money payment.
'''Payment default''': Someone defaults on a money payment.<br>
*'''Delivery default''': Someone defaults on an asset delivery.
'''Delivery default''': Someone defaults on an asset delivery.<br>
*'''Non-default deferral''': Some other externality intervenes to make payment impossible, which does not amount to a default:  a market disruption, a {{isdaprov|Force Majeure Event}}, a forced suspension of obligations for reasons beyond the control or fault of either party.
'''Non-default deferral''': Some other externality intervenes to make payment impossible, which does not amount to a default:  a market disruption, a {{isdaprov|Force Majeure Event}}, a forced suspension of obligations for reasons beyond the control or fault of either party.<br>


In that magically over-complicated way that is the blast signature of {{icds}}, the rate that applies to interest differs depending on the reason for it. The more at fault a party is, the more punitive the rate: the rates for innocent deferrals are called {{isdaprov|Applicable Deferral Rate}}s; the more punitive ones {{isdaprov|Default Rate}}s.
In that magically over-complicated way that is the blast signature of {{icds}}, the rate that applies to interest differs depending on the reason for it. The more “at fault” a party is, the more punitive the rate: the rates for innocent deferrals are called {{isdaprov|Applicable Deferral Rate}}s; the more punitive ones {{isdaprov|Default Rate}}s. (This by the way is one of the significant “upgrades” from the {{1992ma}}, which had a rather half-hearted penalty interest provision in Section {{isda92prov|2(e)}}).


Also the calculation basis is more complicated if the deferral involves delivery of an asset, since you need a way of figuring out the market value of the asset on which interest can be said to accrue.
Also the calculation basis is more complicated if the deferral involves the delivery of an asset, since you need a way of figuring out the market value of the asset on which interest can be said to accrue.


And since one kind of deferral can morph into another kind — upon the expiry of a {{isdaprov|Waiting Period}}, for example — the exact computation of deferrals is fraught: a.  
And since one kind of deferral can morph into another — upon the expiry of a {{isdaprov|Waiting Period}}, for example — the exact computation of deferrals is fraught. You might even think that the ’squad’s quest for infinite exactitude in a scenario which in many cases will include a bankrupt debtor who isn’t going to pay you much of what you are owed in any case, is a bit overdone. We couldn’t possibly comment.
You might even think that the ’squad’s quest for infinite exactitude in a scenario which in many cases will include a bankrupt debtor who isn’t going to pay you much of what you are owed in any case, is a bit overdone.

Revision as of 12:02, 23 December 2023

Section 9(h) deals with the various scenarios where interest — over and above stated Fixed Rate and Floating Rate Options might apply to legs of a Transaction — might apply to deferred and delayed payments under the ISDA. Those scenarios are: Payment default: Someone defaults on a money payment.
Delivery default: Someone defaults on an asset delivery.
Non-default deferral: Some other externality intervenes to make payment impossible, which does not amount to a default: a market disruption, a Force Majeure Event, a forced suspension of obligations for reasons beyond the control or fault of either party.

In that magically over-complicated way that is the blast signature of ISDA’s crack drafting squad™, the rate that applies to interest differs depending on the reason for it. The more “at fault” a party is, the more punitive the rate: the rates for innocent deferrals are called Applicable Deferral Rates; the more punitive ones Default Rates. (This by the way is one of the significant “upgrades” from the 1992 ISDA, which had a rather half-hearted penalty interest provision in Section 2(e)).

Also the calculation basis is more complicated if the deferral involves the delivery of an asset, since you need a way of figuring out the market value of the asset on which interest can be said to accrue.

And since one kind of deferral can morph into another — upon the expiry of a Waiting Period, for example — the exact computation of deferrals is fraught. You might even think that the ’squad’s quest for infinite exactitude in a scenario which in many cases will include a bankrupt debtor who isn’t going to pay you much of what you are owed in any case, is a bit overdone. We couldn’t possibly comment.