Effect of Designation - ISDA Provision

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2002 ISDA Master Agreement
A Jolly Contrarian owner’s manual™

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Section 6(c) in a Nutshell

Use at your own risk, campers!
6(c) Effect of Designation: If an Early Termination Date is designated:
(i) it will take place when designated, even if the event which triggered no longer exists.
(ii) no more payments or deliveries will be required under any Terminated Transactions.
Any Close-out Amount will be determined under Section 6(e).

Full text of Section 6(c)

6(c) Effect of Designation.
(i) If notice designating an Early Termination Date is given under Section 6(a) or 6(b), the Early Termination Date will occur on the date so designated, whether or not the relevant Event of Default or Termination Event is then continuing. (ii) Upon the occurrence or effective designation of an Early Termination Date, no further payments or deliveries under Section 2(a)(i) or 9(h)(i) in respect of the Terminated Transactions will be required to be made, but without prejudice to the other provisions of this Agreement. The amount, if any, payable in respect of an Early Termination Date will be determined pursuant to Sections 6(e) and 9(h)(ii).

Related agreements and comparisons

Related Agreements
Click here for the text of Section 6(c) in the 1992 ISDA
Template:Isdadiff 6(c)

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Content and comparisons

The framers of the 2002 ISDA daringly changed a shall to a will in the final line. Otherwise, identical.

Previous: 6(a) | 6(b) Next: 6(d) | 6(e)



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.


General discussion

To see the steps to closing out the ISDA, see Right to Terminate Following Event of Default.


See also