ISDA Comparison: Difference between revisions

The {{isdaprov|Events of Default}} in the {{1992isda}} were not massively changed in the {{2002isda}}. Some revisions were made to reflect changes in market practice (by which parties would religiously, tediously, amend their 1992 {{isdaprov|Schedules}}) including:

*'''Cure Periods''': Some of the cure periods were reduced out of the concern that these cure periods create undue risk when market volatility increases in times of turmoil in the financial markets. This was addressed in the {{2002isda}} by:

#reducing the cure period for a failure to pay or deliver pursuant to Section 5(a)(i) from three Local Business Days to one Local Business Day following notice of such failure;  

#reducing the cure period for a payment {{isdaprov|Default Under Specified Transaction}} pursuant to Section 5(a)(v)(2) from three Local Business Days to one Local Business Day; and  

#reducing the cure period for an involuntary bankruptcy filing pursuant to Section 5(a)(vii)(1)(B) from thirty to fifteen days.  

*'''{{isdaprov|Breach of Agreement}}''': An additional subsection has been added to the {{isdaprov|Breach of Agreement}} {{isdaprov|Event of Default}} in Section 5(a)(ii) that establishes an {{isdaprov|Event of Default}} when “the party disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, this Master Agreement, any Confirmation executed and delivered by that party or any {{isdaprov|Transaction}} evidenced by such a Confirmation (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf).” Although this additional subsection is part of Section 5(a)(ii), the thirty day cure period applies only to Section 5(a)(ii)(1) and not to the new subparagraph (2). This new {{isdaprov|Event of Default}} is similar to the {{isdaprov|Credit Support Default}} {{isdaprov|Event of Default}} in Section 5(a)(iii)(3) of the {{1992isda}}, which was also included in the {{2002isda}}.  

#Delivery and other general defaults require the liquidation or early termination of the {{isdaprov|Specified Transaction}} (for general defaults) or the liquidation or early termination of all outstanding {{isdaprov|Transaction}}s under the documentation supporting the {{isdaprov|Specified Transaction}} (for a delivery default). This change was made with repos in mind because a failure under a repo is not uncommon and may not be indicative of the {{isdaprov|Defaulting Party}}’s creditworthiness, particularly when the default concerns delivery obligations.