Interpretation - NY CSA Provision

1994 ISDA Credit Support Annex (New York law) A Jolly Contrarian owner’s manual™ 1 in a Nutshell™ The JC’s Nutshell™ summary of this term has moved uptown to the subscription-only ninja tier. For the cost of ½ a weekly 🍺 you can get it here. Sign up at Substack. 1 in all its glory Para 1 Interpretation 1(a) Definitions and Inconsistency. Capitalized terms not otherwise defined herein or elsewhere in this Agreement have the meanings specified pursuant to Paragraph 12, and all references in this Annex to Paragraphs are to Paragraphs of this Annex. In the event of any inconsistency between this Annex and the other provisions of this Schedule, this Annex will prevail, and in the event of any inconsistency between Paragraph 13 and the other provisions of this Annex, Paragraph 13 will prevail. 1(b) Secured Party and Pledgor. All references in this Annex to the “Secured Party” will be to either party when acting in that capacity and all corresponding references to the “Pledgor” will be to the other party when acting in that capacity; provided, however, that if Other Posted Support is held by a party to this Annex, all references herein to that party as the Secured Party with respect to that Other Posted Support will be to that party as the beneficiary thereof and will not subject that support or that party as the beneficiary thereof to provisions of law generally relating to security interests and secured parties. edit Resources and Navigation Resources Wikitext | Nutshell wikitext Navigation 1 (Interpretation) | 2 (Security Interest) | 3 (Credit Support Obligations) | 4 ( Conditions Precedent, Transfer Timing, Calculations and Substitutions) | 5 (Dispute Resolution) | 6 (Holding and Using Posted Collateral (VM)) | 7 (Events of Default) | 8 (Certain Rights and Remedies) | 9 (Representations) | 10 (Expenses) | 11 (Miscellaneous) | 12 (Definitions) | 13 (Elections and Variables Index: Click ᐅ to expand: Category NY CSA not found Premium version of this page

Overview

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Summary

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A paragraph of unremarkable, if unnecessary, throat-clearing, the “definitions and inconsistency” clauses are largely the same across all versions of the CSA.

“Transfer”

With one exception: the English law versions, but not the New York law ones, are marred by a bizarre for the avoidance of doubt rider which is both a non sequitur — no one was talking about “transfers” here, much less was in any particular state of doubt about them — but also an own goal: rather than avoiding doubt, this rider does nothing quite so much as introduce it.

Wait: was I meant to be doubting something here? Should I have been confused? Have I missed something?

There is nothing a cheerful attorney likes more than to worry about things, and she will toss sleeplessly for nights on end, fully occupied by questions such as — is “delivery” of cash different from “payment” of it? Is there something legally significant about “payment” that I somehow missed, in Banking Law 302, in 1989?

Tell your legal eagles to relax. It won’t do any good, but you can tell them. To the best the JC can figure out, all this means is that a Transferor must physically part with its collateral, handing it bodily over to the Transferee.

There is an interesting question as to what this might mean if your counterparty is also your banker, and you direct it to transfer credit support into the bank account you maintain with it, meaning that legally the counterparty hasn’t done anything with the cash at all — not an unusual scenario, should you be a hedge fund and the counterparty your prime broker — but this will set your legal eagles off again, and we don’t want that. We are just getting started.

Nomenclature

Being an annex to an ISDA Master Agreement, references to the “Agreement” means that particular ISDA Master Agreement; the “Annex” is the credit support annex and, if you were pedantic enough that you really felt the need to refer to it, the “Schedule” is the schedule to the ISDA Master Agreement.

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• The JC’s famous Nutshell™ summary of this clause

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See also

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