Value - NY VM CSA Provision

2016 ISDA Credit Support Annex (VM) (New York law) 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 Value 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 “Value” means for any Valuation Date or other date for which Value is calculated and subject to Paragraph 5 in the case of a dispute, with respect to: (i) Eligible Collateral (VM) or Posted Collateral (VM) that is: (A) an amount of Cash, the Base Currency Equivalent of such amount multiplied by (VP – HFX); and (B) a security, the Base Currency Equivalent of the bid price obtained by the Valuation Agent multiplied by (VP – HFX), where: VP equals the applicable Valuation Percentage; and HFX equals the applicable FX Haircut Percentage; (ii) Posted Collateral (VM) that consists of items that are not Eligible Collateral (VM) (including any item or any portion of any item that fails to satisfy any (A) Credit Support Eligibility Condition (VM)) applicable to it or (B) applicable Legal Eligibility Requirements), zero; and (iii) Other Eligible Support (VM) and Other Posted Support (VM), as specified in Paragraph 13. 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

Comparisons

The 2016 VM CSA adds in the FX Haircut Percentage into the multiplier, that being (in some jurisdictions) a fairly hefty surcharge for those people who like to collateralise in a currency other than the one in which their derivatives are denominated, and also (partially) corrects the snafu about ineligible credit support, at least on a Default.

Once there is a Default, you are working things out, and FX Haircut Percentages and Valuation Percentages no longer matter because rather than assigning a notional value for the asset in the Base Currency if liquidated — and therefore giving yourself a little buffer for rainy day and so on — the rainy day has arrived. You are actually liquidating the asset, which will already have yesterday’s haircut applied to it, the counterparty isn’t to be giving you any more, and the money you raise from selling the Credit Support Balance, whether eligible or not, is real money, it really pays down your claim, and you have to account to the Defaulting Party’s administrator for anything left once you have closed out your ISDA.

Basics

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