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2014 ISDA Credit Derivatives Definitions
A Jolly Contrarian owner’s manual™
1.16 in a Nutshell™
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| 1.16 in all its glory
Section 1.16 Event Determination Date. “ Event Determination Date” means, with respect to a Credit Event and a Credit Derivative Transaction with respect to which:
- (a) “Auction Settlement” is the applicable Settlement Method and “Buyer or Seller” is the Notifying Party:
- (i) subject to Section 1.16(a)(ii), the Notice Delivery Date, if the Notice Delivery Date occurs during either the Notice Delivery Period or the Post Dismissal Additional Period, provided that neither (A) a DC Credit Event Announcementhas occurred nor (B) a DC No Credit Event Announcement has occurred, in each case, with respect to the Credit Event specified in the Credit Event Notice ; or
- (ii) notwithstanding Section 1.16(a)(i), the Credit Event Resolution Request Date, if a DC Credit Event Announcementhas occurred, the Credit Event Resolution Request Date has occurred on or prior to the last day of the Notice Delivery Period (including prior to the Trade Date) and either:
- (A)
- (I) the Credit Event is not an M(M)R Restructuring; and
- (II) the Trade Date occurs on or prior to a DC Announcement Coverage Cut-off Date; or
- (B)
- (I) the Credit Event is an M(M)R Restructuring; and
- (II) a Credit Event Notice is delivered by a Notifying Party to the other party and is effective on or prior to the Exercise Cut-off Date,
- provided that:
- (x) no Physical Settlement Date, if applicable, or Termination Date has occurred on or prior to the date on which the DC Credit Event Meeting Announcement occurs;
- (y) if any Valuation Date or Delivery Date, as applicable, has occurred on or prior to the date on which the DC Credit Event Meeting Announcement occurs, an Event Determination Dateshall be deemed to have occurred only with respect to the portion of the Floating Rate Payer Calculation Amount, if any, with respect to which no Valuation Date or Delivery Date, as applicable, has occurred; and
- (z) no Credit Event Notice specifying an M(M)R Restructuring} as the only Credit Event has previously been delivered to Seller by Buyer as Notifying Party , (aa) unless the M(M)R Restructuring} specified in such Credit Event Notice is also the subject of the DC Credit Event Question resulting in the occurrence of the Credit Event Resolution Request Date, (bb) unless, and to the extent that, the Exercise Amount specified in such Credit Event Notice was less than the Floating Rate Payer Calculation Amount, or (cc) unless the Credit Derivative Transaction is an Auction Covered Transaction and the Deliverable Obligations set out on the Final List are identical to the Permissible Deliverable Obligations for such Credit Derivative Transaction, or
- (b) Section 1.16(a) does not apply, the Non-Standard Event Determination Date determined in accordance with Section 14.1 ( Non-Standard Event Determination Date).
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Overview
I am going to need to gather myself before going on. Hoo boy.
So this is simply the date on which, if there was a Credit Event, it did — or, if there wasn’t, it did not — officially happen. Simple, right?
Summary
A simple enough idea, you would think, and quite an important one, seeing as it is the date that the consequences of a Credit Event flow. But how the ISDA’s crack drafting squad™ let its fantastical obsession with determining the future run.
In one sense, given how litigationey credit derivatives are, the ’Squad probably felt it had little choice but to embrace its inner pedant — better, the thinking goes, to be exasperated than sued — but there comes a point where pettifoggerous overengineering becomes an unbearably oppressive weight on the poor sods in operations and the legal eagles who have to manage these contingencies should they come about. For sure, they should not come about very often, but when the do it will be a hair-on-fire moment, and the last thing any junior desk lawyer will want is to figure out what the hell Event Determination Date even means, from this tangled skein, with the head of trading, three credit officers and her line manager breathing down her neck.
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See also
References