Transfers - CSA Provision

CSA Anatomy™ →Go uptown 3(a) Transfers. All transfers under this Annex of any Eligible Credit Support, Equivalent Credit Support, Interest Amount or Equivalent Distributions shall be made in accordance with the instructions of the Transferee or Transferor, as applicable, and shall be made: 3(a)(i) in the case of cash, by transfer into one or more bank accounts specified by the recipient; 3(a)(ii) in the case of certificated securities which cannot or which the parties have agreed will not be delivered by book-entry, by delivery in appropriate physical form to the recipient or its account accompanied by any duly executed instruments of transfer, transfer tax stamps and any other documents necessary to constitute a legally valid transfer of the transferring party's legal and beneficial title to the recipient; and 3(a)(iii) in the case of securities which the parties have agreed will be delivered by book-entry, by the giving of written instructions (including, for the avoidance of doubt, instructions given by telex, facsimile transmission or electronic messaging system) to the relevant depository institution or other entity specified by the recipient, together with a written copy of the instructions to the recipient, sufficient, if complied with, to result in a legally effective transfer of the transferring party's legal and beneficial title to the recipient. Subject to Paragraph 4 and unless otherwise specified, if a demand for the transfer of Eligible Credit Support or Equivalent Credit Support is received by the Notification Time, then the relevant transfer will be made not later than the close of business on the Settlement Day relating to the date such demand is received; if a demand is received after the Notification Time, then the relevant transfer will be made not later than the close of business on the Settlement Day relating to the day after the date such demand is received. (View Template) 3(a) Transfers. All transfers under this Annex of any Eligible Credit Support (VM), Equivalent Credit Support (VM), Interest Payment (VM) or Equivalent Distributions will be made in accordance with the instructions of the Transferee or Transferor, as applicable, and will be made: 3(a)(i) in the case of cash, by transfer into one or more bank accounts specified by the recipient; 3(a)(ii) in the case of certificated securities which cannot or which the parties have agreed will not be delivered by book-entry, by delivery in appropriate physical form to the recipient or its account accompanied by any duly executed instruments of transfer, transfer tax stamps and any other documents necessary to constitute a legally valid transfer of the transferring party’s legal and beneficial title to the recipient; and 3(a)(iii) in the case of securities which the parties have agreed will be delivered by book-entry, by causing the relevant depository institution (s) or other securities intermediaries to make changes to their books and records sufficient to result in a legally effective transfer of the transferring party’s legal and beneficial title to the recipient or its agent. Subject to Paragraph 4, and unless otherwise specified in Paragraph 11, if a demand for the transfer of Eligible Credit Support (VM) or Equivalent Credit Support (VM) is received by the Notification Time, then the relevant transfer will be made not later than the close of business on the Regular Settlement Day relating to the date such demand is received; if a demand is received after the Notification Time, then the relevant transfer will be made not later than the close of business on the Regular Settlement Day relating to the day after the date such demand is received. (View Template) Resources Full wikitext | Nutshell wikitext English Law | 1 Interpretation | 2 Credit Support Obligations | 3 Transfers, Calculations and Exchanges | 4 Dispute Resolution | 5 Transfer of Title, No Security Interest, Distributions and Interest Amount | 6 Default | 7 Representation | 8 Expenses | 9 Miscellaneous | 10 Definitions | 11 Elections and Variables · Base Currency and Eligible Currency · Credit Support Obligations · Valuation and Timing · Exchange Date · Dispute Resolution · Distributions and Interest Amount · Addresses for Transfers · Credit Support Offsets · Other CSA 2018 ISDA Credit Support Deed for Initial Margin Index: Click ᐅ to expand: CSA 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.

Commentary

Relevant for transfers of Delivery Amounts and Return Amounts.

CSA transfer timings

This is how the timing works for CSA transfers.

Terminology check: to make this easy, we refer to both {{{{{1}}}|Delivery Amount}}s and {{{{{1}}}|Return Amount}}s as “{{{{{1}}}|Transfer Amount}}s”. This cuts out a lot of “Delivery Amount and/or Return Amount as the case may be” nonsense. The date on which someone demands a {{{{{1}}}|Transfer Amount}} we call a “{{{{{1}}}|Demand Date}}”.

To be clear, neither Demand Date nor {{{{{1}}}|Transfer Amount}} are “ISDA canon”.

Remember the {{{{{1}}}|Valuation Agent}} is simply the person making the demand.

1. Value {{{{{1}}}|Exposure}} and {{{{{1}}}|Credit Support Balance}}: Firstly, value what you are going to call: the {{{{{1}}}|Transfer Amount}} under para {{{{{1}}}|2(a)}} or {{{{{1}}}|2(b)}}. This is roughly {{{{{1}}}|Credit Support Balance}} - {{{{{1}}}|Exposure}} (or vice versa).
   1. Under {{{{{1}}}|2(a)}}, the {{{{{1}}}|Transferor}} will transfer {{{{{1}}}|Eligible Credit Support}} having a {{{{{1}}}|Value}} as of the date of transfer of the {{{{{1}}}|Transfer Amount}}.
   2. Per the {{{{{1}}}|Calculations}} provision, all calculations happen at the {{{{{1}}}|Valuation Time}}. Fluctuations in value after that time won’t invalidate the {{{{{1}}}|Transfer Amount}}, but they may mean a party can immediately call for more {{{{{1}}}|Credit Support}} (that is, have another {{{{{1}}}|Demand Date}}).
   3. The {{{{{1}}}|Valuation Time}} keys off the {{{{{1}}}|Valuation Date}}.
2. {{{{{1}}}|Demand Date}}: On or promptly following any {{{{{1}}}|Valuation Date}} (it need not be a {{{{{1}}}|Local Business Day}}) on which the {{{{{1}}}|Exposure}} has moved in its favour, one party may demand a {{{{{1}}}|Delivery Amount}} (para 2(a)) or a {{{{{1}}}|Return Amount}} (para 2(b)).
3. {{{{{1}}}|Transfer Date}}: Under para {{{{{1}}}|3(a)}} ({{{{{1}}}|Transfers}}) if the demand is received before the {{{{{1}}}|Notification Time}} on a {{{{{1}}}|Demand Date}} that is a {{{{{1}}}|Local Business Day}} the transfer must be made by close of business on the related Regular Settlement Day. If received after the {{{{{1}}}|Notification Time}} or on a non-{{{{{1}}}|Local Business Day}}, the transfer must be made by close of business on the Regular Settlement Day relating to the day after the Demand Date.
4. Settlement Day: Here is where things differ materially between the 1995 CSA and the 2016 VM CSA.
   1. 1995 CSA: The Settlement Day for any day (whether or not it is a {{{{{1}}}|Local Business Day}}) is:
      1. Cash: for cash, the next {{{{{1}}}|Local Business Day}} and,
      2. Securities: for securities, the {{{{{1}}}|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.
   2. 2016 VM CSA: In the new world we have the new concept of the Regular Settlement Day, and this is the same Local Business Day as the Demand Date. The run-off text at the end of Paragraph 3(a) gives you a little more flex: if the demand came after the Notification Time, then you must make the transfer by close on the Regular Settlement Day for the next day. Just how the business days interact under the ISDA and CSA is about as complicated as string theory, by the way.