Base Currency and Eligible Currency - CSA Provision

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

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Paragraph 11(a) in a Nutshell

Use at your own risk, campers!

Full text of Paragraph 11(a)

11(a) Base Currency and Eligible Currency.
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 - 7
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
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Content and comparisons

Template:M comp disc 1995 CSA 11(a)

Summary

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 csa 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 negotiated election to say: The Base Currency is United States dollars unless specified here: Pounds sterling.

This, 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 breathes down her neck. Why, she will wonder, didn’t it just say, “Base Currency: Pounds sterling?”

Why indeed.

Point two is that, 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. But the fallback it chooses, for an English law agreement, is US dollars. The one demographic least likely to be trading under an English law ISDA Master Agreement are those whose home currency is USD.

Lastly, ISDA has taken advantage of none of the many redrafting opportunities it has had since 1994 to correct either of these irritations. The 2016 VM CSA and the 2016 NY Law VM CSA both take the same approach.

See also

Template:M sa 1995 CSA 11(a)

References