Delivery Amount - VM CSA Provision

2016 ISDA Credit Support Annex (VM) (English law) A Jolly Contrarian owner’s manual™ Resources and navigation Resources Full wikitext | Nutshell wikitext Navigation 1 (Interpretation) | 2 (Credit Support Obligations) | 3 (Transfers, Calculations and Exchanges) | 4 (Dispute Resolution) | 5 (Title Transfer etc) | 6 (Default) | 7 (Representation) | 8 (Expenses) | 9 (Miscellaneous) | 10 (Definitions) | 11 (Elections and Variables) Index: Click ᐅ to expand: 2016 VM CSA 2018 CSD 1995 CSA Paragraph 2(a) in a Nutshell™ Use at your own risk, campers! 2(a) Delivery Amount. If the Transferee demands a Delivery Amount at least equal to the Transferor’s Minimum Transfer Amount on (or following) a Valuation Date, the Transferor must transfer Eligible Credit Support with a Value of the Delivery Amount (rounded under Paragraph 11(c)(vi)(B)) to the Transferee. The “Delivery Amount” is the amount by which the Transferee’s Exposure exceeds the Value of the Transferor’s Credit Support Balance on that Valuation Date (adjusted for pending but unsettled transfers). view template Full text of Paragraph 2(a) 2(a) Delivery Amount (VM). Subject to Paragraphs 3 and 4, upon a demand made by the Transferee on or promptly following a Valuation Date, if the Delivery Amount (VM) for that Valuation Date equals or exceeds the Transferor’s Minimum Transfer Amount, then the Transferor will transfer to the Transferee Eligible Credit Support (VM) having a Value as of the date of transfer at least equal to the applicable Delivery Amount (VM) (rounded pursuant to Paragraph 11(c)(vi)(B)). Unless otherwise specified in Paragraph 11(c), the “Delivery Amount (VM)” applicable to the Transferor for any Valuation Date will equal the amount by which: (i) the Transferee’s Exposure exceeds (ii) the Value as of that Valuation Date of the Transferor’s Credit Support Balance (VM) (adjusted to include any prior Delivery Amount (VM) and to exclude any prior Return Amount (VM) , the transfer of which, in either case, has not yet been completed and for which the relevant Regular Settlement Day falls on or after such Valuation Date). view template 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.

Content and comparisons

Now the interesting thing here is the difference that pledged collateral under the New York law versions of the CSA makes over title-transferred collateral regime of the English law versions. You will see the difference in the NY law version’s Delivery Amount, which is the positive difference between Secured Party’s Exposure and the value of Posted Credit Support held by the Secured Party — easy, right? — and the equivalent provision in the English law versions which is the positive difference between the Transferee’s Exposure and the Credit Support adjusted to exclude any inflight but unsettled collateral movements.

The English law versions are a bit more leaden in how they describe things but these amount to the same thing: you don’t get any credit (support) for collateral until it has landed with the other party.

This creates some curious scenarios, as you will see.

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Summary

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See also

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