Template:Csa 3 summ

We have set out the transfer timings — no small minefield — in the premium section, since it was really painful to do. Freeloaders: just be aware of the slippage due to the {{{{{1}}}|Notification Time}}, the mindwarp that is the definition of {{{{{1}}}|Settlement Day}} and {{{{{1}}}|Regular Settlement Day}}, and the fact that the relevant {{{{{1}}}|Local Business Day}} is in the place of receipt, not {{{{{1}}}|Transmission}}, and so on.

The reality is that collateral operations teams have got most of this taped, automated, and if anything were to foul up they would have long since ironed it out. And the move to call-cash daily margining has probably decomplicated things, too.

Exchanges

A counterparty who has posted one form of {{{{{1}}}|Eligible Credit Support}} and can ask the {{{{{1}}}|Transferee}} to switch it for something else. The {{{{{1}}}|Transferee}} doesn’t have to, but derivatives counterparties being the reasonable commercial fellows they are — and their operations teams being no-nonsense pragmatists they are — they will generally allow this as part of the normal ebb and flow of collateral operations. Probably less of a thing now 2016 VM CSAs tend to be cash only and base currency cash at that, but the possibility remains, and as, to our enduring regreet, we know, ISDA’s crack drafting squad™ is not usually one to let unexplored possibilities go undocumented.

Note here the {{{{{1}}}|Transferor}} can ask for an exchange, but the {{{{{1}}}|Transferee}} is not obliged to accept it. This is a fundamental provision of “title transfer”: once the {{{{{1}}}|Eligible Credit Support}} is delivered under a title-transfer 1995 CSA, the {{{{{1}}}|Transferee}} owns it absolutely. It only has to return {{{{{1}}}|Equivalent Credit Support}}. This is a special, legal ninja use of the word “equivalent”. It means “fungible”; exactly the same as ~; not “broadly similar to ~”.

This is important also from a pricing (and operational) perspective: otherwise the {{{{{1}}}|Transferor}} would have a “worst-of” option and would be entitled to continually switch into the "cheapest to deliver" of the {{{{{1}}}|Eligible Credit Support}}. Needless to say, the increased collateral flows would also increase the operational burden.

{{{{{1}}}|Delivery Amount}}s: Contrast this with {{{{{1}}}|Delivery Amounts}}, where a {{{{{1}}}|Transferor}} has the option to deliver the cheapest of the {{{{{1}}}|Eligible Credit Support}} specified in the 1995 CSA.

{{{{{1}}}|Return Amount}}s: A {{{{{1}}}|Transferee}} does have a (limited) option in terms of selecting the {{{{{1}}}|Return Amount}} should there be a requirement to return posted credit support: it can select the cheapest to deliver of all the {{{{{1}}}|Eligible Credit Support}} that has been posted to it which currently comprises its {{{{{1}}}|Credit Support Balance}}.