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2018 ISDA Credit Support Deed (IM) (English law)
A Jolly Contrarian owner’s manual™
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Paragraph 3(c) in a Nutshell™
Use at your own risk, campers!
3(c) Margin Amount (IM); Margin Amount (IA); Margin Approach
3(c)(i) A Chargor’s “Margin Amount (IM)” on a Calculation Date (IM) is the Base Currency Equivalent of the total initial margin required for the Covered Transactions (IM) in question, under the Method used by the Regime specified in Paragraph 13.
3(c)(ii) A Chargor’s “Margin Amount (IA)” is the Base Currency Equivalent of all its Independent Amounts or equivalents (beyond any Margin Amount (IM) or Exposure) in any Other CSA in any other document, over any relevant thresholds the parties may have agreed but otherwise without deduction, all as determined under this Deed.
3(c)(iii) Margin Approach. Based on the “Margin Approach” specified in Paragraph 13 to govern the relationship between “Margin Amount (IM)” and “Margin Amount (IA)”, a Chargor’s “Credit Support Amount (IM)” on any Calculation Date (IM) will be:
- (A) If “Distinct Margin Flow (IM) Approach” applies: Max [Margin Amount (IM) - Threshold (IM), 0], and the Chargor’s Margin Amount (IA) posting obligation under any Other CSA will not be affected in any way.
- (B) If “Allocated Margin Flow (IM/IA) Approach” applies: Max [Margin Amount (IM) - Threshold (IM), 0] and its posting obligation for Margin Amount (IA) under any Other CSA will be reduced by that Credit Support Amount (IM) (subject to a minimum of zero).
- (C) If “Greater of Margin Flow (IM/IA) Approach” applies: Max [Max [Margin Amount (IM) -Threshold (IM), Margin Amount (IA)], 0], and its posting obligation for Margin Amount (IA) under any Other CSA will be reduced to zero.
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Full text of Paragraph 3(c)
3(c) Margin Amount (IM); Margin Amount (IA); Margin Approach
3(c)(i) “Margin Amount (IM)” means, for any Calculation Date (IM) and a posting obligation of a Chargor under a Regime, the Base Currency Equivalent of an amount equal to the sum of the initial margin amounts in respect of the Covered Transactions (IM) determined using the Method specified as applicable to such Regime in Paragraph 13.
3(c)(ii) “Margin Amount (IA)” means, for any Calculation Date (IM) and a posting obligation of a Chargor, the Base Currency Equivalent of an amount equal to the sum of the Independent Amounts (as defined in any Other CSA) applicable to the Chargor and any other amounts applicable to the Chargor (other than any amounts in respect of Margin Amount (IM) or Exposure), however described, intended by the parties to operate as an Independent Amount, if any, after taking into account any relevant Threshold applicable to the Chargor and any other relevant amounts applicable to the Chargor, however described, intended by the parties to operate as a Threshold but prior to giving effect to any other applicable deduction, discharge or netting of such amounts, under or in relation to the Agreement, as determined and reported by the party responsible for calculating such amounts. For the avoidance of doubt, in order to determine the amounts “applicable to the Chargor” for the purposes hereof, the parties will take into account the effect of any conditions precedent applicable to such amounts.
3(c)(iii) Margin Approach. The parties have agreed, in Paragraph 13, to implement one of the following approaches (each a “Margin Approach”) with respect to the relationship between “Margin Amount (IM)” and “Margin Amount (IA)”.
- (A) If the “Distinct Margin Flow (IM) Approach” is specified as applicable in Paragraph 13, the following provisions will apply:
- (1) “Credit Support Amount (IM)” means, with respect to a party as the Chargor, for any Calculation Date (IM), (i) the Margin Amount (IM) applicable to the Chargor, if any, minus (ii) the Chargor’s Threshold (IM); provided, however, that the Credit Support Amount (IM) will be deemed to be zero whenever the calculation of the Credit Support Amount (IM) yields a number less than zero.
- (2) No Amendment to Obligations in respect of Margin Amount (IA). The posting obligation of a Chargor in respect of any amount that constitutes a Margin Amount (IA) under any Other CSA shall not be affected or amended in any way by the provisions of this Deed.
- (B) If the “Allocated Margin Flow (IM/IA) Approach” is specified as applicable in Paragraph 13, the following provisions will apply:
- (1) “Credit Support Amount (IM)” means, with respect to a party as the Chargor, for any Calculation Date (IM), (i) the Margin Amount (IM) applicable to the Chargor, if any, minus (ii) the Chargor’s Threshold (IM); provided, however, that the Credit Support Amount (IM) will be deemed to be zero whenever the calculation of the Credit Support Amount (IM) yields a number less than zero.
- (2) Amendment to Obligations in respect of Margin Amount (IA). The posting obligation of a Chargor in respect of any amount that constitutes a Margin Amount (IA) under any Other CSA shall be reduced on an aggregate basis by the amount of the Chargor’s Credit Support Amount (IM); provided, however, that if, after such reduction, any such Margin Amount (IA) would be a negative amount, such Margin Amount (IA) will be deemed to be zero.
- (C) If the “Greater of Margin Flow (IM/IA) Approach” is specified as applicable in Paragraph 13, the following provisions will apply:
- (1) “Credit Support Amount (IM)” means, with respect to a party as the Chargor, for any Calculation Date (IM), the greater of (i)(A) the Margin Amount (IM) applicable to the Chargor, if any, minus (B) the Chargor’s Threshold (IM) and (ii) the Margin Amount (IA); provided, however, that the Credit Support Amount (IM) will be deemed to be zero whenever the calculation of the Credit Support Amount (IM) yields a number less than zero.
- (2) Amendment to Obligations in respect of Margin Amount (IA). The posting obligation of a Chargor in respect of any amount that constitutes a Margin Amount (IA) under any Other CSA, other than such obligations of a Chargor under this Deed, shall be reduced to zero.
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