Market Quotation - 1992 ISDA Provision

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1992 ISDA Master Agreement
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section Market Quotation in a Nutshell

Use at your own risk, campers!
Market Quotation” when valuing Terminated Transactions, will be based on quotations from Reference Market-makers for the amount that those Reference Market-makers would pay (expressed as a negative) or require (expressed as a positive) to enter into a “Replacement Transaction” preserving the economic equivalent of all remaining payments and deliveries after the Early Termination Date by the parties under the relevant Terminated Transactions had they not been terminated, excluding any Unpaid Amounts.

Each Reference Market-maker must quote on or as soon as practicable after the Early Termination Date on the basis of such documentation as the determining party and the Reference Market-maker may in good faith agree, including as regards any Credit Support Document.

If more than three Reference Market-makers quote, the Market Quotation will be their average having disregarded the highest and lowest. If exactly three do, the Market Quotation will be the middle quotation.

If fewer than three Reference Market-makers quote, it will not be possible to determine a Market Quotation [and, to calculate the Settlement Amount, the determining party must value the affected Terminated Transactions by reference to the determining party’s Loss][1].

Full text of section Market Quotation

Market Quotation” means, with respect to one or more Terminated Transactions and a party making the determination, an amount determined on the basis of quotations from Reference Market-makers. Each quotation will be for an amount, if any, that would be paid to such party (expressed as a negative number) or by such party (expressed as a positive number) in consideration of an agreement between such party (taking into account any existing Credit Support Document with respect to the obligations of such party) and the quoting Reference Market-maker to enter into a transaction (the “Replacement Transaction”) that would have the effect of preserving for such party the economic equivalent of any payment or delivery (whether the underlying obligation was absolute or contingent and assuming the satisfaction of each applicable condition precedent) by the parties under Section 2(a)(i) in respect of such Terminated Transaction or group of Terminated Transactions that would, but for the occurrence of the relevant Early Termination Date, have been required after that date. For this purpose, Unpaid Amounts in respect of the Terminated Transaction or group of Terminated Transactions are to be excluded but, without limitation, any payment or delivery that would, but for the relevant Early Termination Date, have been required (assuming satisfaction of each applicable condition precedent) after that Early Termination Date is to be included. The Replacement Transaction would be subject to such documentation as such party and the Reference Market-maker may, in good faith, agree. The party making the determination (or its agent) will request each Reference Market-maker to provide its quotation to the extent reasonably practicable as of the same day and time (without regard to different time zones) on or as soon as reasonably practicable after the relevant Early Termination Date. The day and time as of which those quotations are to be obtained will be selected in good faith by the party obliged to make a determination under Section 6(e), and, if each party is so obliged, after consultation with the other. If more than three quotations are provided, the Market Quotation will be the arithmetic mean of the quotations, without regard to the quotations having the highest and lowest values. If exactly three such quotations are provided, the Market Quotation will be the quotation remaining after disregarding the highest and lowest quotations. For this purpose, if more than one quotation has the same highest value or lowest value, then one of such quotations shall be disregarded. If fewer than three quotations are provided, it will be deemed that the Market Quotation in respect of such Terminated Transaction or group of Terminated Transactions cannot be determined.

Related agreements and comparisons

Related Agreements
Click here for the text of Section Market Quotation in the 2002 ISDA
Comparisons
Template:Isdadiff Market Quotation

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See also

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References

  1. This last bracketed bit isn’t in the definition of Market Quotation, but this is the implication of how the Settlement Amount procedure works