Interpretation - CSA Provision

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1995 ISDA Credit Support Annex (English Law)

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1 in a Nutshell

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1 in all its glory

Paragraph 1. Interpretation
Capitalised terms not otherwise defined in this Annex or elsewhere in this Agreement have the meanings specified pursuant to Paragraph 10, and all references in this Annex to Paragraphs are to Paragraphs of this Annex. In the event of any inconsistency between this Annex and the other provisions of this Schedule, this Annex will prevail, and in the event of any inconsistency between Paragraph 11 and the other provisions of this Annex, Paragraph 11 will prevail. For the avoidance of doubt, references to “transfer” in this Annex mean, in relation to cash, payment and, in relation to other assets, delivery.

The varieties of ISDA CSA
Subject 1994 NY 1995 Eng 2016 VM NY 2016 VM Eng 2018 IM Eng
Preamble Pre Pre Pre Pre Pre
Interpretation 1 1 1 1 1
Security Interest 2 - 2 - 2
Credit Support Obligations 3 2 3 2 3
Transfers, Calculations and Exchanges - 3 - 3 -
Conditions Precedent, Transfer Timing, Calculations and Substitutions 4 - 4 - 4
Dispute Resolution 5 4 5 4 5
Holding and Using Posted Collateral 6 - 6 - 6
Transfer of Title, No Security Interest - 5 - 5 -
Events of Default 7 6 7 6 7
Rights and Remedies 8 - 8 - 8
Representations 9 7 9 7 9
Expenses 10 8 10 8 10
Miscellaneous 11 9 11 9 11
Definitions 12 10 12 10 12
Elections and Variables 13 11 13 11 13

Resources and Navigation

Overview

Big change between 1995 and 2016 is the addition of Paragraph 1(b) in the 2016 VM CSA, rabbiting on about Other CSAs, Covered Transactions and so on.

Summary

A paragraph of unremarkable, if unnecessary, throat-clearing, the “definitions and inconsistency” clauses are largely the same across all versions of the CSA.

“Transfer”

With one exception: the English law versions, but not the New York law ones, are marred by a bizarre for the avoidance of doubt rider which is both a non sequitur — no one was talking about “transfers” here, much less was in any particular state of doubt about them — but also an own goal: rather than avoiding doubt, this rider does nothing quite so much as introduce it.

Wait: was I meant to be doubting something here? Should I have been confused? Have I missed something?

There is nothing a cheerful attorney likes more than to worry about things, and she will toss sleeplessly for nights on end, fully occupied by questions such as — is “delivery” of cash different from “payment” of it? Is there something legally significant about “payment” that I somehow missed, in Banking Law 302, in 1989?

Tell your legal eagles to relax. It won’t do any good, but you can tell them. To the best the JC can figure out, all this means is that a Transferor must physically part with its collateral, handing it bodily over to the Transferee.

There is an interesting question as to what this might mean if your counterparty is also your banker, and you direct it to transfer credit support into the bank account you maintain with it, meaning that legally the counterparty hasn’t done anything with the cash at all — not an unusual scenario, should you be a hedge fund and the counterparty your prime broker — but this will set your legal eagles off again, and we don’t want that. We are just getting started.

Nomenclature

Being an annex to an ISDA Master Agreement, references to the “Agreement” means that particular ISDA Master Agreement; the “Annex” is the credit support annex and, if you were pedantic enough that you really felt the need to refer to it, the “Schedule” is the schedule to the ISDA Master Agreement.

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See also

Template:M sa 1995 CSA 1

References