Base Currency - CSA Provision

ISDA 1995 English Law Credit Support Annex A Jolly Contrarian owner’s manual™ Go premium Overview — Summary — Premium — See also — Wikitext Crosscheck: →NY OG →Eng OG →NY VM →Eng VM →Eng IM Base Currency and Eligible Currency in a Nutshell™ The JC’s Nutshell™ summary of this term has moved uptown to the subscription-only ninja tier. For the cost of ½ a weekly 🍺 you can get it here. Sign up at Substack. You can even ask questions! Ask about it here. Original text “Base Currency” means the currency specified as such in Paragraph 11(a)(i). “Eligible Currency” means each currency specified as such in Paragraph 11(a)(ii), if such currency is freely available. 11(a)(i) “Base Currency” means United States Dollars unless otherwise specified here: 11(a)(ii) “Eligible Currency” means the Base Currency and each other currency specified here: 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 Index: Click ᐅ to expand: CSA

Basics

American hegemony

The 1994 NY CSA contemplates only US dollars, so the 2016 NY Law VM CSA is something of an olive branch to the remainder of the planet or sign that the American Empire is truly in a state of unstoppable decline, depending on how you look at it. The English law credit support annexes have always been more inclusive, allowing any number of foreign currencies to be the Base Currency, or Eligible Currencies. Laudable.

English law docs

Two interesting (lack of) design points here:

Firstly, the fallback for the Base Currency is specified in the Paragraph 11 election schedule and not the pre-printed definition of Base Currency inside the csaprov itself. The election schedule is the bit you amend, so by the lights of the Document Design Subcommittee of ISDA’s crack drafting squad™, you might expect your preprinted definition to say: The Base Currency is United States dollars unless specified otherwise in the Elections, and then your Elections schedule could say, “as per the Definitions section” or, if different, say, “Pounds sterling”.

Seeing “United States dollars unless specified here: Pounds Sterling,” it is submitted, would confuse someone not expecting it. Especially someone in a panic, who has just been sent a bad photocopy of a heavily amended fifteen-year-old ISDA and CSA of a counterparty whose credit is plummeting and told to quickly figure out how to close out this blessed agreement, with the head of risk breathing onionly down her neck. Why, she will wonder, didn’t it just say, “Base Currency: Pounds sterling?”

Why indeed.

Secondly, unlike the 1992 ISDA whose publication it quickly followed, the 1995 CSA does at least think about a fallback Base Currency for those who have forgotten to specify one. The fallback it chooses, for an English law agreement, is US dollars. Just as French is the language of international diplomacy and English the language of international commerce, the greenback is the language of international money’s worth, so we suppose this makes sense.

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