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| ==Sharepoint Reference==
| | {{newisdamanual|5(a)(v)}} |
| {{isdasplink4|Default|Under|Specified|Transaction}} | |
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| ==Section 5(a)(v) {{1992ma}}==
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| (v) '''''Default under {{isdaprov|Specified Transaction}}.''''' The party, any {{isdaprov|Credit Support Provider}} of such party or
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| any applicable {{isdaprov|Specified Entity}} of such party
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|
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| (1) defaults under a {{isdaprov|Specified Transaction}} and, after giving effect to any applicable notice requirement
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| or [[grace period]], there occurs a liquidation of, an acceleration of obligations under, or an early termination
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| of, that {{isdaprov|Specified Transaction}},
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|
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| (2) defaults, after giving effect to any applicable notice requirement or grace period, in making any payment
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| or delivery due on the last payment, delivery or exchange date of, or any payment on early termination
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| of, a {{isdaprov|Specified Transaction}} (or such default continues for at least three Local Business Days if there
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| is no applicable notice requirement or grace period) or
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|
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| (3) disaffirms, disclaims, repudiates or rejects, in whole or in part, a {{isdaprov|Specified Transaction}} (or such
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| action is taken by any person or entity appointed or empowered to operate it or act on its behalf);
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| ==Section 5(v) {{2002ma}}==
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| (v) ''Default Under Specified Transaction''. The party, any [[Credit Support Provider]] of such party or any applicable
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| Specified Entity of such party:―
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|
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| (l) defaults (other than by failing to make a delivery) under a [[Specified Transaction]] or any credit support arrangement
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| relating to a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, such
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| default results in a liquidation of, an acceleration of obligations under, or an early termination of, that Specified
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| Transaction;
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|
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| (2) defaults, after giving effect to any applicable notice requirement or grace period, in making any payment due on the
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| last payment or exchange date of, or any payment on early termination of, a Specified Transaction (or, if there is no
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| applicable notice requirement or [[grace period]], such default continues for at least one Local [[Business Day]]);
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|
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| (3) defaults in making any delivery due under (including any delivery due on the last delivery or exchange date of) a
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| Specified Transaction or any credit support arrangement relating to a Specified Transaction and, after giving effect to
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| any applicable notice requirement or grace period, such default results in a liquidation of, an acceleration of obligations
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| under, or an early termination of, all transactions outstanding under the documentation applicable to that Specified
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| Transaction; or
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|
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| (4) disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, a Specified
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| Transaction or any credit support arrangement relating to a Specified Transaction that is, in either case, confirmed or
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| evidenced by a document or other confirming evidence executed and delivered by that party, Credit Support Provider or
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| Specified Entity (or such action is taken by any person or entity appointed or empowered to operate it or act on its
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| behalf);
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| ==Commentary==
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| This is like {{isdaprov|Cross Default}}, but for non "borrowing" style transactions - for example [[swap|swap agreements]] agreements and [[repo]]s, '''but only transactions between the two counterparties and their referenced {{isdaprov|Credit Support Provider}}s and {{isdaprov|Specified Entities}}'''.
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| If a [[Counterparty]] (or its {{isdaprov|Credit Support Provider}} or {{isdaprov|Specified Entity}}) experiences an {{isdaprov|Event of Default}} under a [[swap]] agreement (or other transaction falling within the definition of {{isdaprov|Specified Transaction}}, which is typically wide - but check the agreement!) with you, this constitutes an {{isdaprov|Event of Default}} under the ISDA.
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| * '''Default, Not Acceleration''': note it is triggered by an event of default under the {{isdaprov|Specified Transaction}}, not a acceleration ''following'' an event of default. So even if you don't close out under the {{isdaprov|Specified Transaction}}, you may still close out under this [[ISDA]] (and vice versa) - in this way it imports all the Events of Default from all {{isdaprov|Specified Transaction}}s into the present one.
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| *'''What if I do "jump the gun"?''': could a wrongfully submitted notice of default be treated as a [[repudiatory|repudiation]]/[[anticipatory breach]] by the "[[non-defaulting party]]" giving the other party at least the right to withhold payments on the basis that this would constitute a {{isdaprov|Potential Event of Default}} by the party submitting the notice? There's not much law on point, but the starting point is "no" - it would simply be an ineffective notice. '''However''', a non-payment on the basis of an ineffective notice would be impermissible and may itself amount to a Failure to Pay. But as to the mere dispatch of the notice itself, there is relatively recent case law (albeit in the bond world) stating that an acceleration notice that is submitted wrongfully, i.e. when no actual event of default, is merely ineffective and does not give rise to a claim for breach of contract/ damages from "defaulting party". Clearly this has not been considered in context of ISDA per se (and may be nuances here that would lead to different result) but at it is a start.
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| ===Comparison with {{isdaprov|Cross Default}}===
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| *No requirement for a {{isdaprov|Threshold Amount}} to be hit before trigger: any default will trigger it.
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| *Only relates to transactions between the two counterparties (or any {{isdaprov|Specified Entity}}) - a default by a counterparty under a derivatives transaction *with a third party* would not trigger this clause.
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| {{isdaanatomy}}
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| *[http://sharepoint/sites/documentationunitlegal/Wiki/Wiki%20Pages/ISDA.aspx Doc Unit knowhow Wiki]
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| *[http://www.stroock.com/SiteFiles/Pub175.pdf The Importance Of Being Specified: Designating Affiliates - Strook]
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| {{Cat2|Events of Default|Policies - Treasury}}
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