Counterparts and Confirmations - ISDA Provision

ISDA Anatomy™ →Go uptown In a Nutshell™ Section 9(e): 9(e) Counterparts and Confirmations. 9(e)(i) Counterparts: This Agreement (and any amendment) may be executed in counterparts. 9(e)(ii) Confirmations: The parties will be bound by the terms of each Transaction from the moment they agree to those terms. They must agree a confirmation (which they will designate as a Confirmation) as soon as practicable afterwards. The Confirmation will be evidence of a binding supplement to this Agreement. They may do this electronically (including by email!). view template 2002 ISDA full text of Section 9(e): 9(e) Counterparts and Confirmations. 9(e)(i) This Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts (including by facsimile transmission and by electronic messaging system), each of which will be deemed an original. 9(e)(ii) The parties intend that they are legally bound by the terms of each Transaction from the moment they agree to those terms (whether orally or otherwise). A Confirmation will be entered into as soon as practicable and may be executed and delivered in counterparts (including by facsimile transmission) or be created by an exchange of telexes, by an exchange of electronic messages on an electronic messaging system or by an exchange of e-mails, which in each case will be sufficient for all purposes to evidence a binding supplement to this Agreement. The parties will specify therein or through another effective means that any such counterpart, telex, electronic message or e-mail constitutes a Confirmation. view template Click here for the text of Section 9(e) in the 1992 ISDA 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.

Section 9(e)(ii) Confirmations

If a swap trader agrees one thing, and the Confirmation the parties subsequently sign says another, which gives? A 15 second dealing-floor exchange on a crackly taped line, or the carefully-wrought ten page, counterpart-executed legal Confirmation that follows it?

TL;DR: The original oral trade prevails.

The prime thing to notice here is that the Confirmation is evidence of the Transaction, but it does not override the original Transaction terms, if they are different.

That is, the binding trade may be a phone call or a bloomberg chat. (This sits kind of uneasily with that Entire Agreement clause, but still.)

If there is a dispute about the terms of your Confirmation, you are going to have to pull the tapes.

There are some very good reasons for this. Firstly, the original trade was done by the trader with the trading mandate. The confirmation will be punted out by some dude in ops who might not be able to read the trader’s handwriting. Ops can and will get things wrong. That is correctable on the record. The trader doesn't “get things wrong”. If she does, you're into mistake territory. The law on contractual mistakes is beloved by students of the law and misunderstood by everyone else. But generally, if the trader erroneously executes a trade, and the trader’s counterparty understands it correctly, the trader, and the firm she works for, will be bound by the error. That's not a contractual mistake. It's just a bad trade.

By contrast, a settlements and reconciliations dude who sends out a confirm which carelessly misinterprets the trade log is not making a contractual mistake: he is incorrectly recording the contract. That wasn't the trade (good or bad) that the trader did.

Similarly, the reconciliations dude who sends out a confirm which corrects an error made by the trader has no mandate to make that change. The error is the trader’s. The trader should live with it, and throw herself at the mercy of the jurisprudence of contractual mistakes if need be: it is not for said reconciliations dude to pull her out of a hole.

Note also the addition of e-mail as a means of communication to the 2002 version (email not really having been a “thing” in 1992). This caused all kinds of fear and loathing amongst the judiciary, when asked about it, as can be seen in the frightful case of Greenclose v National Westminster Bank plc.Oh dear, oh dear, oh dear.

Timely confirmation regulations and deemed consent

Both EMIR and Dodd Frank have timely confirmation requirements obliging parties to have confirmed their scratchy tape recordings within a short period (around 3 days). This fell out of a huge backlog in confirming structured credit derivatives trades following the Lehman collapse.

Section 9(e)(i) Counterparts

There is an impassioned essay about the idiocy of counterparts clauses elsewhere.

See also

• Mistake
• Counterparts
• Greenclose

9 Miscellaneous

9(a) Entire Agreement
9(b) Amendments
9(c) Survival of Obligations
9(d) Remedies Cumulative
9(e) Counterparts and Confirmations
9(f) No Waiver of Rights
9(g) Headings
9(h) Interest and Compensation (2002 ISDA only)