Myths and legends of the market, ISDA edition
The JC’s guide to the foundational mythology of the Aïessdiyé.™
/ɪzdə ˈnɪndʒə/ (n.)
One trained in the ways of the Single Agreement.
Steeped in the knowledge of the First Men and, yea, even before them, to the black dawn of prehistory when free cash flows were first discovered in the wild and artificially set against each other for pleasing effect by the Children of the Woods.
ISDA ninjas have a wealth of esoteric knowledge quite useless to them in any other environment than the one in which they pass their careers — waste deep in the septic sludge of Additional Termination Events, engaged in trench warfare with souls that, deep down, we recognise as like-minded, but still arrayed in slit trenches a few score yards away from us, lobbing unexploded covenants at us, as we would to them, by day and night.
There is war poetry that they write about their enemies who might otherwise be friends, share a drink, see sunsets glow and so on.
With profound apologies to Wilfred Owen.
They the value of encumbered assets mused,
Too fix’d in charge, or pledge, or surety to reuse.
Then, as I probed the liens, one sprang up, and cried
With piteous recharacterisation in its eyes,
“It is distressèd debt!” as if to justify —
How that speculation tanked. I knew the truth and made a margin call,—
Absent limit, all doubt avoided: we stood in Hell.
With a thousand fears that doc-jockey’s face was grained;
Yet, no representations (to which Part 3(c) applied)
Reached there from where our aspirations died.
“Strange friend,” I said, “I see no incoming credit support,
To allay my credit’s darkening fear. I thought
A covenant might not be inordinate.
But came there no such warranty, not senior nor subordinate.”
“None,” said that other, “save this unperfectèd charge,
The hopelessness! Whatever beneficial interest I hold,
Was title to this wretched asset flawed?
Were’st thou by my tax attorney’s explanation bored?
Her expertise lies not in thought, nor deed, nor tedious phrase,
But mocks the steady drifting of one’s gaze,
Toward the floor — the sky — the wall —
The whole entropic all.
And if I grieve, I grieve for wasted words:
Cast carelessly about, in clumps and hanks of twisted flannel —
Carve-ins, carve-outs, carve-ons; carve-unders strewn about
In fractal spumes: a paradoxic annal.
For, by my glee, might many lawy’rs laugh,
At my double negatives. That ditch, in which I thought
I would not lie,
I must now die.
And so expired — marked-down — the option cruelly tamed:
The bid price of war, the offered war disclaimed.
No key man shall have a trigger pulled once waived.
And should one follow, modified, and be saved.
Execution will be swift, regardless of the TARGET.
None will break their cost of funding though their change in law.
The mark-up was mine — Credit made me — it had mystery;
Subject matter expertise was mine, and I was ninjery:
To hide my client identifier by this redacting hand
With vain provisos excepting that which it hath banned.
Then, with legal sludge that clogs its chariot-wheels,
I would anoint the contract by which the broker deals,
Without limit, from time to time, amended with the spanner
Never fraud, gross negligence nor default
Exercisèd always in commercially reasonable manner —
These are our closing memoranda; our articles of good faith.
We put them in the first draft; held out for seven, removed them in the eighth
We reached accord, that is to say, through words and not the code of war.
By refitting EMIR, avoiding doubt, remediating LIBOR.
“I am the NAV trigger you pulled, my friend. You waived it not.
In fog of war your unbending risk approach you would not flout
Look, I missed a little margin call, by just a bit: you closed me out.
I risk-reduced as best I could; when all is told
My lucky streak ran out;
My credit line went cold.
Let us sleep now. . . .”