Template:Isda Preamble summ
Like all good stories, the ISDA starts with a {{ {{{1}}}|Preamble}}. Everyone, once, stares at that gnomic title and thinks, “okay, what the hell is this all about?”
Well, step this way, young padawan. Step into this rabbithole. Personal note: in Wellington, New Zealand, a chap called Gerald (if you’re reading, hi, Gerald!) asked a callow young contrarian to look have a look at this odd document that seemed to be called an Aïessdiyé once, in about 1995, and — well, here we all are, folks.
Honestly, if I had known how much time I was going to spend with the damn thing I would have paid a lot more attention to it in the first place.
The ISDA Master Agreement
The ISDA Master Agreement is the basic framework that applies to anyone who touches down on planet ISDA. Three versions are, more or less, still in use:
2002 ISDA
The still, after all these years, state-of-the-art 2002 ISDA. This is the most popular version — it took industry participants and awfully long time to get comfortable with it, despite its innovations being largely sensible, but now most of the European and Asian markets trades on the 2002 ISDA.
1992 ISDA
The first really global, earth-shaking version of the ISDA master was the 1992. This is still popular with traditionalists, those who can’t abide a one-day grace period for Failure to Pay or Delivery, and Americans. Until quite recently a good part of the American market was still on the 1992 ISDA — most of those heavily modified to take in most of the innovations of the 2002 ISDA, to the point where the refusal to budge looks to be largely down to the colossal weight of institutional inertia, of just basic bloody-mindedness. But the anecdotal sense we have is that even in New York, these days, the 2002 ISDA is the master agreement of choice for the discerning ninja.
1987 ISDA
The 1987 ISDA is all but a dead letter now, but just as there are still soldiers in the Burmese jungle fighting the Second World War, through inattention or truculence, there may be pockets, embedded deep in the impassable hinterlands of structured finance who still cling to the 1987 ISDA, notwithstanding its well-recognised shortcomings. If you come across one of these, proceed with caution: 1987 ISDAs don’t have a lot of safety features a modern derivatives counterparty relies on, so are only for real die-hard vinyl junkies and weirdos.
All three versions have a tri-partite form: Pre-printed Master, {{{{{1}}}|Schedule}}, {{{{{1}}}|Confirmation}} and — well, this is controversial: for is it, or is it not, part of the ISDA Master Agreement? — Credit Support Annex.
Non-functional versions
There are two non-functional versions:
1985 ISDA Code
The interesting-only-for-its-place-in-the-fossil-record-and-witty-acrostic 1985 ISDA Code.
2008 ISDA
The “this-fixes-everything, on-chain, smart, artificially intelligent” 2008 ISDA was introduced during, and tragically destroyed by, the Global Financial Crisis.
Oh, all right there isn’t a 2008 ISDA. Never was. That’s a little running JC in-joke.[1]
Industry associations
Sell-side
ISDA, which publishes the ISDA, was the “International Swap Dealers Associations, Inc.” — interesting plural, that — but in any case, outwardly a sell-side industry association. Sometime between 1992 and 2002, it rebranded itself as the “International Swaps and Derivatives Association, Inc.”: singular, at the same time more unitary and more inclusive sounding, but still in spirit the same old ISDA, stake-held predominantly by the largest broker-dealers on the face of the Earth.
It may have aspirations to conquer the world — increasingly, it seems hell-bent on doing so, encroaching on the commodities, carbon, securities financing and crypto domains — but for now ISDA remains a “dealer-community” association, largely devoted to the swap.
Buy-side
These days the “buy-side lobby” is bigger, more organised and better represented than it used to be, with the following associations representing its interests:
AIMA (the Alternative Investment Management Association)
EFAMA (the European Fund and Asset Management Association)
The MFA (the Managed Funds Association) — not to be confused, by the way, with the Fund Management Association of Kenya — and
The AI (the Investment Association).
The preamble
The {{{{{1}}}|preamble}} is just the loosener before things get properly going, and there is not a lot to see. It has not changed a lot between the 1992 ISDA and the 2002 ISDA (nor indeed, from the 1987 ISDA, except that the Single Agreement clause got promoted from a casual remark during the warm-up, in the 1987 ISDA, to the first searching delivery of the first over.[2]