Default under specified transaction
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A default under specified transaction, or "DUST", is a concept native to the ISDA Master Agreement but which you may see in other Master Trading Documentation (but not all: it is not usual in a 2010 GMSLA or a Global Master Repurchase Agreement), which provides a right to terminate a master trading agreement upon a default by your counterparty under another equivalent master agreement between you and that counterparty.
It can be compared to cross default, which allows you to terminate your master agreement when the counterparty defaults under indebtedness to a third party (not you).
Differences between cross default and DUST
- Cross default generally references indebtedbess; DUST references bilateral derivative and trading transactions whcih are not in the nature of indebtedness;
- Cross default is only triggered once a certain threshold amount of indebtedness is defaulted upon; DUST is triggered upon any breach;
- Cross default references your counterparty owes to a third party; DUST references other obligations your counterparty owes you.