Template:Csa transaction versus credit support document

Profound onotological differences

Unlike a title transfer English law CSA, the 2016 NY Law VM CSA is not a Transaction under the ISDA Master Agreement, but is in fact a Credit Support Document: a standalone collateral arrangement that stands aloof and apart from the ISDA Master Agreement and all its little diabolical Transactions, and the reason for that is — and, spoiler: it’s not a very good one — because while a English law CSA, by being a title transfer collateral arrangement, reverses the indebtedness claim outright, an 2016 NY Law VM CSA (and, for that matter, an English law Credit Support Deed) does not: it only provides a security interest. The in-the-money counterparty is still in-the-money. It is just secured for that exposure. The outright exposure between the parties does not change.

This is magical, bamboozling stuff — deep ISDA lore — and, at least where rehypothecation is allowed under Paragraph 6(c) of a 2016 NY Law VM CSA — it pretty much always is — it serves no real purpose, because even though you say you are only pledging the collateral, in the the greasy light of commercial reality, from the moment the Secured Party rehypothecates your pledged assets away into the market, dear Pledgor you have transferred your title outright. <ref>