Representation - CSA Provision

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1995 ISDA Credit Support Annex (English Law)
A Jolly Contrarian owner’s manual™

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Clause 7 in a Nutshell

Use at your own risk, campers!
Paragraph 7. Representation
Each party represents on each transfer date that it has the right to transfer all property it transfers under this Annex, free of any encumbrance (other than a customary clearing system lien).

Full text of Clause 7

Paragraph 7. Representation
Each party represents to the other party (which representation will be deemed to be repeated as of each date on which it transfers Eligible Credit Support, Equivalent Credit Support or Equivalent Distributions) that it is the sole owner of or otherwise has the right to transfer all Eligible Credit Support, Equivalent Credit Support or Equivalent Distributions it transfers to the other party under this Annex, free and clear of any security interest, lien, encumbrance or other restriction (other than a lien routinely imposed on all securities in a relevant clearance system).
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Content and comparisons

Substantively identical between the 1995 ISDA CSA and 2016 ISDA VM CSA.



Clearing system liens

A little bit of “well, it really ought to go without saying but, hell, you are derivatives lawyers, so we know that’s not how you roll” drafting.

In these modern, dematerialised times, the securities in a clearing system — that is, pretty much all securities — exist only as entries in a ledger maintained by the clearing system. The individual securities are not security-printed, physical things. [1]

In any case, like all good intermediaries, the clearing system gets fees from participants for being a clearing system. To guard against non-payment of these fees, it keeps a lien on all global securities it holds.

Now all this sits a long way down the stack of turtles that makes up the modern metaphysical financial system — almost so deep as to be beyond the paranoid articulations of an ISDA ninja — but, as you can see, not quite.


See also

Template:M sa 1995 CSA 7



  1. See common depositary for more information.