Preamble - NY VM CSA Provision

2016 ISDA Credit Support Annex (VM) (New York law) A Jolly Contrarian owner’s manual™ Resources and navigation Resources Wikitext | Nutshell wikitext Navigation 1 (Interpretation) | 2 (Security Interest) | 3 (Credit Support Obligations) | 4 ( Conditions Precedent, Transfer Timing, Calculations and Substitutions) | 5 (Dispute Resolution) | 6 (Holding and Using Posted Collateral (VM)) | 7 (Events of Default) | 8 (Certain Rights and Remedies) | 9 (Representations) | 10 (Expenses) | 11 (Miscellaneous) | 12 (Definitions) | 13 (Elections and Variables) Index: Click ᐅ to expand: 2016 NY VM CSA Paragraph preamble in a Nutshell™ Use at your own risk, campers! 2016 Credit Support Annex for Variation Margin (VM) dated as of ………………………. to the Schedule to the ISDA Master Agreement dated as of ........................................................... between ........................................................ and .................................................... (“Party A”) (“Party B”) This Annex is part of the Schedule to the Agreement described above. It is a Credit Support Document for both parties. The parties agree: view template Full text of Paragraph preamble 2016 Credit Support Annex for Variation Margin (VM) dated as of ………………………. to the Schedule to the ISDA Master Agreement dated as of ........................................................... between ........................................................ and .................................................... (“Party A”) (“Party B”) This Annex supplements, forms part of, and is subject to, the above-referenced Agreement, is part of its Schedule and is a Credit Support Document under this Agreement with respect to each party. Accordingly, the parties agree as follows:— view template Related agreements and comparisons Related Agreements Click here for the text of Section preamble in the 1994 New York law CSA Click here for the text of Section preamble in the 1995 English Law CSA Click here for the text of Section preamble in the 2016 English Law VM CSA Comparisons Template:2nycsadiff preamble Template:Nycsadiff preamble 1995 CSA and 2016 VM CSA: click for comparison 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

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Summary

Deep ontological differences between NY and English law versions

Unlike a title transfer English law CSA which is expressed to be a Transaction under the ISDA Master Agreement, the 2016 NY Law VM CSA is not: it is instead a “Credit Support Document”: a standalone collateral arrangement that stands aloof and apart from the ISDA Master Agreement and all its little diabolical Transactions. The reason for this is — spoiler: it’s not a very good one — because while a English law CSA, by being a title transfer collateral arrangement, necessarily reverses the indebtedness between the parties outright, an 2016 NY Law VM CSA (and, for that matter, an English law English law CSD) does not: it only provides a security interest. The in-the-money counterparty is still in-the-money. It is just secured for that exposure. The outright exposure between the parties does not change as a result of the pledge of credit support.

This is magical, bamboozling stuff — deep ISDA lore — and, at least where rehypothecation is allowed under Paragraph 6(c) of a 2016 NY Law VM CSA — it pretty much always is — it serves no real purpose, because even though you say you are only pledging the collateral, in the the greasy light of commercial reality, from the moment the Secured Party rehypothecates your pledged assets away into the market, dear Pledgor you have transferred your title outright.

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General discussion

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See also

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