1987 ISDA Interest Rate and Currency Exchange Agreement: Difference between revisions

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1987 ISDA Interest Rate and Currency Exchange Agreement (view source)

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-Well and truly out of date version of the {{isdama}}, though we do have some legacy agreements under it.
+{{a|isda|{{image|Musket|jpg|An unloaded {{1987ma}}}}}}Well-and-truly out-of-date version of the {{isdama}}, replaced first by the {{1992isda}} and then the {{2002isda}}, the {{1987isda}} is nonetheless useful for forensic archaeologists interested to know how the state-of-the-art version got to be how it is today.<ref>There are the odd [[Fossil record|fossils]] who still insist on using it, though most of those have long-since been taken out and shot, a process now happening to disciples of the {{1992ma}}.</ref>
-Replaced by the {{1992isda}}, and then the {{2002isda}}.
+And it is quite the yarn: you don’t get as shot-up and crazed as an {{isdama}} without some scrapes and shootouts along the way.
-===Differences between the {1987 form and the 1992 form===
+Nineteen eighty-seven was a different world; the very first swap transaction<ref>Between IBM and the World Bank — see [[swap history]] for more.</ref> was only consummated six years previously. The swap master agreement was a nascent idea to streamline the documentation between counterparties, and to capture this nascent idea of [[close-out netting]], but was predicated on the legal precepts of banking facilities. An {{isdama}} is not, of course, any kind of banking facility: certainly not if it is [[Variation margin|daily-margined]], as is now required by regulation for most of the 600 trillion of swaps transacted annually.
-====Reason for update====
+Many of the lending-derived credit concepts in the {{isdama}} are practically redundant, but they hang on — artifacts of the great [[doctrine of precedent|dogma of precedent]].<ref>Did I say “dogma”? I meant doctrine!</ref> If it is in the agreement, it must be there for a reason, and if I cannot conceive of one that must be down to my own mental frailty, rather than the caution or basic fussiness of our forefathers and foremothers.
-Principally, to:
+So if you find something odd, check the [[fossil record]] to see if it has been there from the outset. If it has — for example, the 20-day limit on close out notices under Section {{isda87prov|6(a)}} — then there’s a fair chance the market developments of the last 32 years might have rendered it pointless.
+===Differences between {{1987isda}} and {{1992isda}}===
+The {{1992ma}} was introduced principally, to:
 *'''Expand range of products covered''': Expand beyond [[interest rate derivatives]] and [[currency derivatives]] and promote the benefit of [[close-out netting]]
 *'''Market Developments''': Reflect legal developments between 1987 and 1992.
+*'''[[Physical delivery]]''': Permit [[physical delivery]]
+*'''{{isdaprov|Settlement Amount}}s''': Introduce greater flexibility for determining {{isdaprov|Settlement Amount}}s on termination of {{isdaprov|Transactions}} (introducing the {{isdaprov|Loss}}, {{isdaprov|Market Quotation}}, {{isdaprov|First Method}} and {{isdaprov|Second Method}} regimes thereafter replaced in the {{2002ma}} by {{isdaprov|Close-out Amount}}).
+*'''Two-way payments on termination''': Under the {{1987ma}} a party may not receive termination payments (this is the "limited two-way payment" provision).
+*'''Settlement netting''': more flexibility for netting groups of transactions under Section {{isda87prov|2}} - under the {{1987isda}} you could either [[net]] just within single transactions or across all {{isda87prov|Transactions}}.
-====Significant Changes====
+There are some others.
-*'''Physcial Delivery''': Permits [[physical delivery]]
-*'''{{isdaprov|Settlement Amount}}s''': Introduices greater flexibility for determining {{isdaprov|Settlement Amount}}s upon termination of {{isdaprov|Transactions}} (the {{isdaprov|Loss}}, {{isdaprov|Market Quotation}}, {{isdaprov|First Method}} and {{isdaprov|Second Method}} regimes were introduced, subsequently refined by the {{2002ma}} into {{isdaprov|Close-out Amount}}).
-*'''Two-Way Payments on Termination''': Inder the {{1987ma}} a party may not receive termination payments (this is the "limited two-way payment" provision).
-*'''Settlemnent netting''': more flexibility for netting groups of transactions under Section 2 - under the {{1987ma}} you could either net just within single transactions or across all Transactions.
-there are some others - a helpful guide can be found [http://www.google.co.uk/url?sa=t&rct=j&q=difference%20between%201987%20isda%20and%201992%20isda&source=web&cd=6&ved=0CFYQFjAF&url=http%3A%2F%2Fwww.otcguide.com.au%2Fotcwr%2Fpdf%2F1573077_6.pdf&ei=3uwkUOSYOdOChQf71IGYCw&usg=AFQjCNGsjOd2eJW8xzQhB-xeglU_-EUuCA here]
-{{isdaanatomy}}
+{{sa}}
+*{{1992ma}}
+*{{2002ma}}
+*[[1985 ISDA Code of Standard Wording, Assumptions and Provisions for Swaps]]
+{{ref}}