Local Business Day - ISDA Provision
2002 ISDA Master Agreement
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Local Business Day in all its glory
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The keen will have noticed that “Local Business Day” under an English law CSA is defined quite separately from “Local Business Day” as it is defined under the ISDA Master Agreement itself, whereas a Local Business Day under a New York law CSA, while separately defining the term, only goes on to defer to the original definition of LBD in the ISDA Master Agreement, pausing only to clarify that references to “payment” in the ISDA Master Agreement definiton are deemed to include Transfers under the CSA.
Why ISDA’s British crack drafting squad™ couldn’t have done this too, we can only wonder.
There is no plain “Business Day” in the ISDA Master Agreement
Even old stagers are occasionally surprised to rediscover that ISDA’s crack drafting squad™ didn’t define the expression “Business Day” in the ISDA Master Agreement: only “Local Business Day” and “General Business Day” (and even the latter of these is only used in the definition of Local Business Day). It is, of course, defined in the 2006 ISDA Definitions and their spiritual successors the 2021 ISDA Interest Rate Derivatives Definitions — but these operate only at Confirmation/Transaction level. (in fairness, the first ISDA definitions were published before the 1992 ISDA, so there was never much of a gap)
But there must have been an uneasy period where there was no Business Day
“General Business Day” and “Local Business Day”
“General Business Day” means a day on which commercial banks are open for general business (including dealings in foreign exchange and foreign currency deposits).
Thereby, a short definition is used to prop up a longer one. You might think “business day” is kind of a clear-enough, well-understood-enough term that it shouldn’t need to be defined at all, but that is not how ISDA’s crack drafting squad™ operates.
Local Business Day and Local Delivery Day
What is the difference between a “Local Business Day” and a “Local Delivery Day”?
Local Business Day is a lot more fiddly, and context dependent, for one thing. As per our nutshell summary, what counts as a Local Business Day depends on who is asking: for performing general obligations it looks to the Transaction Confirmation; for Waiting Periods it depends where the triggering event occurs, for payments it depends where the account is located, for communications it depends on the location of the recipient.
A Local Delivery Day — which comes up only in when considering whether one has failed to deliver a non-cash security of some kind (Section 5(a)(i)) or, even though ostensibly having failed to dliver it, you haven’t yet technically failed to deliver it, on account of an intervening Illegality or Force Majeure which has triggered a Waiting Period before that failure to deliver becomes an official Failure to Pay or Deliver.
Local Business Day is also defined in the 1995 CSA (and its successors, dependents, friends and relations), as it the related term Regular Settlement Day. Which makes for fun, as premium subscribers will see below.
- The JC’s famous Nutshell™ summary of this clause
- The wisdom of burying an agreement to agree into a fundamental operating provision
- How business days work for demands under a CSA
The many gorgeous, multi-hued variations on the business day can be enjoyed as follows:
ISDA extended universe
- Local Business Day
- General Business Day (2002 only)
- Local Delivery Day (2002 only)
- Local Delivery Day (and its friends and relations)