Undead ISDA

The status of every defunct ISDA master agreement, once all transactions have terminated, whether through the exigencies of a stressed close-out, or simply through the entropy and general lassitude of a modern life in which many erstwhile ISDA devotees grew bored, or adversely regulated, and gave up on swaps, letting the last remaining transactions to roll off and scamper, free, into the fragrant meadows of oblivion.

ISDA Anatomy™ →Go uptown Uh-oh: honey — did I check the residual Cross Default risk on that old 87 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.

For while you can terminate a Transaction under an ISDA Master Agreement — and all of them at once, if things really come to that — none of its printed forms envisages the parties terminating the master agreement itself. It has no general no-fault termination provisions so, unless you and your counterparty can confect one — for that you will need communion wine, garlic, wooden stakes and so on — a discarded ISDA arrangement will just lie there, locked-in, mute, transfixed, plastered to the infinite like some ghostly apparition, frozen at the event horizon of a black hole for ever — surviving, indefinitely, some believe even beyond the expiry of the very entities whose trading relationship it once described.

Some would say this is a non-point, as un-alive as the ISDA that presents it. For an ISDA under which there are no extant Transactions carries no financial obligations and presents no risk. If no Transactions remain that can close out, what earthly concern is it of either counterparty if there are notional obligations going unfulfulled? Who will take the point that you are no longer fulfilling your coverant to send your annual report within three months of its publication? Only a person yet to meet an internal auditor could ask that question. and besides, what of those meta-obligations? That two-edged Cross Default clause... could it ... ?

You may laugh, but note only this: they who so haughtily wave such trifling concerns away yet still go quiet and will speak not of the Dark Lord.

See also

• Early Termination under the ISDA Master Agreement
• No-fault termination
• The Good Man
• The Dark Lord of the Swaps