Legally Ineligible Credit Support (VM) - NY VM CSA Provision: Difference between revisions
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{{nycsaanat|11(g)|9(e)|}} | {{nycsaanat|11(g)|9(e)|}} | ||
{{csa legally ineligible credit support}} | |||
===No such concept in the {{csa}} or the {{1994csa}}=== | |||
Concerning as it does ''legal'' and not ''contractual'' ineligibility of credit support, and that being a function of criteria imposed by regulators on ones ''mandatory'' obligations to post and collect margin, which did not exist before 2016, it is hardly surprising the distant ancestors of {{icds}} didn’t anticipate the need for this clause, which is convoluted, and you can avoid the need for entirely should you post [[cash]] in a sensible currency. | |||
===Difference between {{vmcsa}} and {{nyvmcsa}}=== | |||
In most respects they are identical to the {{vmcsa}}. Two differences: | |||
*The exception in the {{vmcsa}} for {{vmcsaprov|Legally Ineligible Credit Support}} counting as {{vmcsaprov|Eligible Credit Support}} for the purpose of {{vmcsaprov|Credit Support Balance}} and {{vmcsaprov|Equivalent Credit Support}}. This is because, being a {{ttca}}, even though it is worth zero — for the purposes of discharging one’s regulatory obligation to collect and return collateral — in the real world out there it is still worth something, and the Transferee still has to give it back, even if that has no effect on Valuations under the {{vmcsa}}. With a {{nyvmcsa}} since the {{nyvmcsaprov|Secured Party}} “never” gets it in the first place<ref>Ahem [[Use of Posted Collateral (VM) - NY VM CSA Provision|rehypothecation]] folks.</ref> the {{nyvmcsaprov|Secured Party}} doesn’t have to give it back either. | |||
*The exception for valuation on {{csaprov|Default}} — that flows from the fundamental difference between the {{vmcsa}} a {{ttca}} which is a {{isdaprov|Transaction}} under the {{isdama}} and the {{nyvmcsa}} which is a {{scta}} which is only a {{isdaprov|Credit Support Document}} under the {{isdama}}. | |||
Revision as of 15:10, 17 January 2020
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Differences between CSA versions
No such concept in the 1995 CSA or the 1994 NY CSA
Concerning as it does legal and not contractual ineligibility of credit support, and that being a function of criteria imposed by regulators on one’s mandatory obligations to post and collect margin, which did not exist before 2016, it is hardly surprising ISDA’s crack drafting squad™ of yore didn’t anticipate the need for this clause, which is convoluted, finnicky, and you can avoid the need for it entirely, should you post cash in a sensible currency.
Difference between 2016 VM CSA and 2016 NY Law VM CSA
In most respects they are identical (with references to “Transferor” and “Transferee” switched to “Pledgor” and “Secured Party”). There are two technical differences, for completists:
- The exception in the 2016 VM CSA for Legally Ineligible Credit Support counting as Eligible Credit Support for the purpose of Credit Support Balance and Equivalent Credit Support. This is because, being a title transfer collateral arrangement, even though it is worth zero for the purposes of discharging one’s regulatory obligation to collect and return collateral, in the real world it is still worth something, and the Transferee still has to give it back, even if that has no effect on valuations under the 2016 VM CSA. With a 2016 NY Law VM CSA since the Secured Party never[1] “gets” it in the first place, the Secured Party doesn’t have to give it back either. (By the way, if you aren’t saying, “hey, but what about rehypothecation under Paragraph 6(c)?” yet, you should be.)
- The exception for valuation on Default — that flows from the fundamental difference between the 2016 VM CSA a title transfer collateral arrangement which is a Transaction under the ISDA Master Agreement and the 2016 NY Law VM CSA which is a security financial collateral arrangement which is only a Credit Support Document under the ISDA Master Agreement.
No such concept in the 1995 CSA or the 1994 NY CSA
Concerning as it does legal and not contractual ineligibility of credit support, and that being a function of criteria imposed by regulators on ones mandatory obligations to post and collect margin, which did not exist before 2016, it is hardly surprising the distant ancestors of ISDA’s crack drafting squad™ didn’t anticipate the need for this clause, which is convoluted, and you can avoid the need for entirely should you post cash in a sensible currency.
Difference between 2016 VM CSA and 2016 NY Law VM CSA
In most respects they are identical to the 2016 VM CSA. Two differences:
- The exception in the 2016 VM CSA for Legally Ineligible Credit Support counting as Eligible Credit Support for the purpose of Credit Support Balance and Equivalent Credit Support. This is because, being a title transfer collateral arrangement, even though it is worth zero — for the purposes of discharging one’s regulatory obligation to collect and return collateral — in the real world out there it is still worth something, and the Transferee still has to give it back, even if that has no effect on Valuations under the 2016 VM CSA. With a 2016 NY Law VM CSA since the Secured Party “never” gets it in the first place[2] the Secured Party doesn’t have to give it back either.
- The exception for valuation on Default — that flows from the fundamental difference between the 2016 VM CSA a title transfer collateral arrangement which is a Transaction under the ISDA Master Agreement and the 2016 NY Law VM CSA which is a Template:Scta which is only a Credit Support Document under the ISDA Master Agreement.
- ↑ Ahem rehypothecation folks.
- ↑ Ahem rehypothecation folks.