Legally Ineligible Credit Support (VM) - NY VM CSA Provision

Template:Anattitle-9(e)nycsa Go Premium In a Nutshell™ Section Template:9(e)nycsaprov: Template:Nutshell 9(e) NY CSA 11(g) view template Template:9(e)nycsa full text of Section Template:9(e)nycsaprov: Template:ISDA New York Law Credit Support Annex 9(e) 11(g) view template Related Agreements Click [[11(g) - Template:Not9(e)NY CSA Provision|here]] for the text of Section Template:Not9(e)nycsaprov in the [[Template:Not9(e) NY CSA Anatomy|Template:Not9(e) New York law CSA]] Click here for the text of Section [[- CSA Provision|]] in the 1995 English Law CSA Click here for the text of Section [[- VM CSA Provision|]] in the 2016 English Law VM CSA Comparisons Template:2nycsadiff 11(g) 2016 VM CSA and 2016 NY Law VM CSA: click for comparison 1995 CSA and 2016 VM CSA: click for [[special:diff/{{{1}}}/{{{2}}}|comparison]] Template:Anatresources-9(e)nycsaTemplate:Anatnavigation-9(e)nycsa Comments? Questions? Suggestions? Requests? Insults? We’d love to 📧 hear from you. Sign up for our newsletter.

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 “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 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.