Termination Currency - ISDA Provision

ISDA Anatomy™ →Go uptown In a Nutshell™ Section Termination Currency: “Termination Currency” means the Termination Currency specified in the Schedule if it is freely available, and failing that euro for English law-governed Agreements or US Dollars for New York law-governed Agreements. view template 2002 ISDA full text of Section Termination Currency: “Termination Currency” means (a) if a Termination Currency is specified in the Schedule and that currency is freely available, that currency, and (b) otherwise, euro if this Agreement is expressed to be governed by English law or United States Dollars if this Agreement is expressed to be governed by the laws of the State of New York. view template Click here for the text of Section Termination Currency 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.

Compare and contrast with the Base Currency in the CSA. Ideally, you’d want them to be the same. Ten points for style if you can think of a reason for having different ones. Goldman probably could.

So what is this all about, then? Well, swap transactions by nature are likely to have different currencies — cross-currency swaps are, anyway — and if (heaven forfend) you should be closing out a whole portfolio of them, then you will have boil everything down, at some point, to a single currency. Some are better than others — a G7 ones are more liquid and less volatile than others, and each counterparty will have a preference for its own home currency — an investment fund, the base currency of the fund.

The sort of thing you might expect to see specified in the schedule is this:

“Termination Currency” means one of the currencies in which payments are required to be made under a Terminated Transaction selected by the Non-defaulting Party or the non-Affected Party, as the case may be, or where there are two Affected Parties, as agreed between them or, if not agreed, or if the selected currency so is not freely available, [U.S. Dollars][Euro][Pounds Sterling].

The Template:1992 had no fallback Termination Currency for those parties who forget to agree one in their schedule: an impressive design flaw. ISDA’s crack drafting squad™ corrected this for the 2002 ISDA, which assumes EUR or USD (depending on the governing law you select) if you haven’t agreed something else. This means a 2002 version LFC does not need to specify a Termination Currency. Not that you’d ever use a long form confirmation in this day and age, of course.

The Termination Currency concept can be applied to the termination and close-out of single Transactions or groups of Transactions, so it does make sense for it to be "a currency in which payments are due to be made under the relevant Terminated Transaction" - or some such thing.