Effect of Designation - ISDA Provision
2002 ISDA Master Agreement
Section 6(c) in a Nutshell™
Use at your own risk, campers!
Full text of Section 6(c)
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The framers of the 2002 ISDA daringly changed a shall to a will in the final line. Otherwise, identical.
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Once you have designated your Early Termination Date under Section 6(a), proceed directly to Section 6(e) to determine the Close-out Amount (if you are under a 2002 ISDA, or “tiresomely unlabelled amount payable upon early termination of the ISDA Master Agreement” if you a labouring under a 1992 ISDA).
The key thing to observe here is that, suddenly, all Transactions vanish, and all payments and deliveries due under them are suspended, to be replaced by the single Close-out Amount per Transaction, which is then subsumed into the Early Termination Amount for the whole agreement. Note the Close-out Amount does not have an independent existence as a payable amount owed by any party at any point: it is simply a calculation one makes, by reference to a now extinguished Transaction, on the way to determining the whole-agreement Early Termination Amount. This is why a Transaction-specific guarantee is a flawed type of Credit Support Document — at the very point you call upon it, the Transaction will vanish.
To see the steps to closing out the ISDA, see Right to Terminate Following Event of Default.