Template:CSA Transfer Description

Timing of CSA Transfers under the 1995 CSA

This is how the timing works for 1995 CSA transfers:

• Demand Date: On any date, be it a Local Business Day or not, (call it a “Demand Date”, but note it is required by 2(a) or 2(b) to be made “on or promptly following a Valuation Date”), a party may make a demand for a Transfer under Paragraph 2(a) (for a Delivery Amount) or 2(b) (for a Return Amount).
• Valuation Time - Exposure: Note that the point at which the valuation is made is the Valuation Time, which keys off the Valuation Date (by default the 1995 CSA has elections for either COB on the Valuation Date or COB on the Local Business Day immediately before the Valuation Date), and therefore not necessarily the Demand Date.
• Valuation Time - Eligible Credit Support: Per paragraph 2(a) the Transferor will transfer to Eligible Credit Support having a Value equal to the Delivery Amount as of the date of transfer — in this case the Settlement Day. The Calculations provision says all calculations of Value (including of Eligible Credit Support take place at the relevant Valuation Time. Therefore fluctuations in value in the credit support actually delivered after that time won't invalidate the actual transfer amount - but they may mean a party can immediately call for more Credit Support (that is have another Demand Date).
• Transfer Date: Under Paragraph 3(a) (Transfers) if the demand is received before the Notification Time (by default, 1pm London time on a Local Business Day) on that Demand Date, the transfer will be made not later than close of business on the Settlement Day relating to that Demand Date. If received after the Notification Time (ie, after 1pm on a Local Business Day, or at any time on a Demand Date that isn’t itself a Local Business Day), the transfer must be made not later than close of business on the Settlement Day relating to the day (note: ordinary day, not Local Business Day) after the Demand Date.
• Settlement Day: The Settlement Day with respect to any day (whether or not it is a Local Business Day) is:
  • Cash: for cash, the next Local Business Day and,
  • securities: for securities, the Local Business Day after the date on which a trade in the relevant security, if effected on the day in question, would have been settled in accordance with customary practice.

Questions

• Demand Date not a Local Business Day: What if the day in question isn’t itself a Local Business Day? E.g., what if the Transfer demand is received after the Notification Time on a Friday, meaning the Settlement Day takes place on the date on which a trade, effected on a Saturday, would have been settled in accordance with customary practice?
  • Securities: For securities this is ok: a trade effected on a non-business day would be deemed to be effected on the next following Local Business Day anyway, so it would pick this up.
  • Cash: For cash, not so clear.
• What happens if the value of the transferred credit support changes in value on the Settlement Date?