ISDA Master Agreement

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ISDA Anatomy™
incorporating our exclusive ISDA in a Nutshell™


Index: Click to expand:Navigation
The Varieties of ISDA Experience
Subject 2002 (wikitext) 1992 (wikitext) 1987 (wikitext)
Preamble Pre Pre Pre
Interpretation 1 1 1
Obligns/Payment 2 2 2
Representations 3 3 3
Agreements 4 4 4
EODs & Term Events 5

Events of Default
FTPDBreachCSDMisrepDUSTCross DefaultBankruptcyMWA
Termination Events
IllegalityTax EventTEUMCEUMATE

5

Events of Default
FTPDBreachCSDMisrepDUSTCross DefaultBankruptcyMWA
Termination Events
IllegalityTax EventTEUMCEUMATE

5

Events of Default
FTPDBreachCSDMisrepDUSTCross DefaultBankruptcyMWA
Termination Events
IllegalityFMTax EventTEUMCEUMATE

Early Termination 6

Early Termination
ET right on EODET right on TEEffect of DesignationCalculations

6

Early Termination
ET right on EODET right on TEEffect of DesignationCalculationsSet-off

6

Early Termination
ET right on EODET right on TEEffect of DesignationCalculationsSet-off

Transfer 7 7 7
Contractual Currency 8 8 8
Miscellaneous 9 9 9
Offices; Multibranch Parties 10 10 10
Expenses 11 11 11
Notices 12 12 12
Governing Law 13 13 13
Definitions 14 14 14
Schedule Schedule Schedule Schedule
Termination Provisions Part 1 Part 1 Part 1
Tax Representations Part 2 Part 2 Part 2
Documents for Delivery Part 3 Part 3 Part 3
Miscellaneous Part 4 Part 4 Part 4
Other Provisions Part 5 Part 5 Part 5

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Foundational concepts

Architecture

The ISDA Master Agreement

The ISDA Master Agreement is the basic framework which applies to anyone who touches down on planet ISDA. There are three existing versions:

  • the state-of-the-art 2002 ISDA;[1]
  • the still-popular-with-traditionalists-and-Americans 1992 ISDA, and
  • the all-but-retired-but-don’t-forget-there-are-still-soldiers-in-the-Burmese-jungle 1987 ISDA[2]
  • the interesting-only-for-its-place-in-the-fossil-record-and-witty-acrostic 1985 ISDA Code; and
  • there isn’t a 2008 ISDA. That’s a little running JC in-joke.[3]

All three versions have a tri-partite form: Pre-printed Master, Schedule and — well, this is controversial: for is it, or is it not, part of the ISDA Master Agreement? — Credit Support Annex.

Big drafting issues
Netting
  • The importance of close-out netting
  • Netting opinions
  • Counterparty types
  • Automatic Early Termination
  • Collateral
  • Multibranch parties
Collateral

How the CSA works

  • Title transfer versus pledge
  • “Equivalent” credit support
  • Independent Amounts
  • Changes wrought by regulations for variation margin
  • Valuation of collateral and exposure values
Tax representations
Notices and communications
Definitions booklets
Process issues
  • Capacity and authority
  • Onboarding and AML
  • Static data and netting flags
Who are the stakeholders?
    • Credit
    • Treasury
    • Legal
    • Trading
    • Sales


See also

  1. There is no such thing as a 2008 ISDA. That was a joke on our part.
  2. Seriously: proceed with caution with one of these. 1987 ISDAs don’t have a lot of safety features a modern derivatives counterparty relies on, so only for real specialists and weirdos. Think of it like flying a spitfire rather than a 737 Max. Um, okay, bad metaphor.
  3. Talking to yourself might not be the first sign of madness, but having in-jokes with yourself might be.