Automatic Early Termination - ISDA Provision: Difference between revisions

Automatic Early Termination - ISDA Provision (view source)

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-{{fullanat2|isda|6(a)|1992|6(a)|2002}}{{isdaprov|Automatic Early Termination}} is a concept which exists in Section {{isdaprov|6(a)}} {{isdaprov|Right to Terminate Following Event of Default}} of the {{isdama}}. As is so much in the {{isdama}}, it’s all about '''[[Netting]]'''.
+{{isdaanat|6(a)}}
+{{isdaprov|Automatic Early Termination}} is an odd and misunderstood concept which exists in Section {{isdaprov|6(a)}} {{isdaprov|Right to Terminate Following Event of Default}} of the {{isdama}}. As is so much in the {{isdama}}, it’s all about '''[[Netting]]'''. Where a jurisdiction suspends terms of contracts in a period of formal insolvency, the idea is to have the ISDA break before that suspension kicks in — so close-out netting works.
-{{isdaprov|AET}} is only triggered by certain events under the {{isdaprov|Bankruptcy}} [[Events of Default - ISDA Provision|event of default]], and isn’t triggered by {{isdaprov|Cross Default}} for example.
+{{isdaprov|AET}} is thus only triggered by ''certain'' events under the {{isdaprov|Bankruptcy}} [[Events of Default - ISDA Provision|event of default]] — formal bankruptcy procedures — and not by economic events that tend to indicate insolvency (such as an inability to pay debts as they fall due,  [[technical insolvency]] or the exercise of security. Nor does it apply to other Events of Default.
-It only applies to formal {{isdaprov|bankruptcy}} events in the jurisdiction, not “catastrophic credit events that are effectively as good bankruptcy” but which don’t amount to formal {{tag|bankruptcy}} events, for reasons that will become clear below.
 {{automaticearlytermination}}
 ===[[AET]] under the {{1987ma}}===
-Note the somewhat difficult position for AET under the {{1987ma}} - a fuller discussion at that article - which was part of the reason for the move to the {{1992ma}} in the first place.
+Note the somewhat difficult position for {{tag|AET}} under the {{1987ma}} - a fuller discussion at that article - which was part of the reason for the move to the {{1992ma}} in the first place.
 {{seealso}}
 *{{isdaprov|Right to Terminate Following Event of Default}}