Counterparts and Confirmations - ISDA Provision: Difference between revisions

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Counterparts and Confirmations - ISDA Provision (view source)

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{{isdaanat|9(e)}}
{{newisdamanual|9(e)}}
===Section {{isdaprov|9(e)(ii)}} {{isdaprov|Confirmation}}s''' ===
If a swap trader agrees one thing, and the {{isdaprov|Confirmation}} the parties subsequently sign says another, which gives? A 15 second dealing-floor exchange on a crackly taped line, or the carefully-wrought ten page, counterpart-executed legal {{isdaprov|Confirmation}} that follows it?
 
'''TL;DR''': The original trade confirm prevails.
 
The prime thing to notice here is that the {{isdaprov|Confirmation}} is evidence of the {{isdaprov|Transaction}}, ''but it does not override the original {{isdaprov|Transaction}} terms, if they are different''.
 
That is, the binding trade may be a phone call or a bloomberg chat. (This sits kind of uneasily with that {{isdaprov|Entire Agreement}} clause, but still.)
 
If there is a dispute about the terms of your {{isdaprov|Confirmation}}, you are going to have to pull the tapes.
 
There are some very good reasons for this. Firstly, the original trade was done by the trader with the trading mandate. the confirmation will be punted out by some dude in ops who might not be able to read the trader’s handwriting. Ops can and will get things wrong. That is correctable on the record. The trader doesn't get things wrong. If she does, you're into [[mistake]] territory. The law on [[contractual mistake]]s is beloved by students of the law and misunderstood by everyone else.
 
So, a reconciliations dude who sends out a confirm which carelessly misinterprets the trade log is not making a contractual mistake: he is incorrectly recording the contract.
 
Similarly, the reconciliations dude who sends out a confirm ''which corrects an error made by the trader'' has no mandate to make that change. The error is the trader’s. The trader should live with it, and throw herself at the mercy of the jurisprudence of [[contractual mistake]]s if need be: it is not for said reconciliations dude to pull her out of a hole.
 
Note also the addition of [[e-mail]] as a means of communication to the 2002 version (email not really having been a “thing” in 1992). This caused all kinds of [[fear and loathing]] amongst the judiciary, when asked about it, as can be seen in the frightful case of {{casenote|Greenclose|National Westminster Bank plc}}.Oh dear, oh dear, oh dear.
 
==== [[Timely confirmation]] regulations and deemed consent====
Both {{t|EMIR}} and [[Dodd Frank]] have [[timely confirmation]] requirements obliging parties to have confirmed their scratchy tape recordings within a short period (around 3 days). This fell out of a huge backlog in confirming structured [[credit derivatives]] trades following the Lehman collapse.
 
===Section {{isdaprov|9(e)(i)}} '''[[Counterpart]]s'''===
There is an impassioned essay about the idiocy of [[counterparts]] clauses elsewhere<ref>In the [[counterparts]] article, as a matter of fact.</ref>.
 
{{seealso}}
*[[Mistake]]
*[[Counterparts]]
*[[Greenclose]]
 
{{ISDA 2002 Section 9 TOC}}
{{ref}}
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