Netting opinion: Difference between revisions
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[[Netting opinion]]s tend to be long, academic, laden with hypotheticals, appealing to [[Latin]]ate principles of civil law and demanding of unusually skilled powers of comprehension and patience — they are required by regulation to be, in fact — but when it comes down to it, they all say the same thing: that close-out {{tag|netting}} is, ultimately, enforceable: because a [[netting opinion]] would have no reason to exist if it said anything else. | [[Netting opinion]]s tend to be long, academic, laden with hypotheticals, appealing to [[Latin]]ate principles of civil law and demanding of unusually skilled powers of comprehension and patience — they are required by regulation to be, in fact — but when it comes down to it, they all say the same thing: that close-out {{tag|netting}} is, ultimately, enforceable: because a [[netting opinion]] would have no reason to exist if it said anything else. | ||
And so, the netting opinion will say what you know to be true, at gruesome length, clothed in ambiguity and decorated with its own peculiary vocabulary. For example, to utter the following confection in any other context would be to invite a bunch of fives, but it will go unchallenged in a Continental netting opinion: | |||
:“According to legal literature, [[forward contract|forward contracts]] (''marchés a terme'') are [[synallagmatic]] (that is, the parties enter into mutual commitments, each binding itself to the other) and onerous contracts (that is, one party gives or promises something as a [[consideration]] for the commitment of the other party) and contain an [[aleatory]] element (''contrat aléatoire'').”<ref>What this seems to be saying is these arrangements involve [[mutual obligations]] and [[consideration]] — in other words, they are “legal [[contract|contracts]]”, and the parties address themselves to a chance (“[[aleatory]]”) element outside their mutual control: that is, they’re “''[[derivative]] [[contract]]s''”.</ref> | :“According to legal literature, [[forward contract|forward contracts]] (''marchés a terme'') are [[synallagmatic]] (that is, the parties enter into mutual commitments, each binding itself to the other) and onerous contracts (that is, one party gives or promises something as a [[consideration]] for the commitment of the other party) and contain an [[aleatory]] element (''contrat aléatoire'').”<ref>What this seems to be saying is these arrangements involve [[mutual obligations]] and [[consideration]] — in other words, they are “legal [[contract|contracts]]”, and the parties address themselves to a chance (“[[aleatory]]”) element outside their mutual control: that is, they’re “''[[derivative]] [[contract]]s''”.</ref> | ||
Revision as of 11:11, 25 June 2019
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Not just a legal opinion — at the best of times a dreary, charmless and pointless affair — but one addressing one of the most soul-obliterating questions a grown adult could pose: whether the effectiveness of close-out netting under a master trading agreement would be respected by an insolvency administrator in the jurisdiction of an insolvent counterparty to that agreement.
Netting opinions tend to be long, academic, laden with hypotheticals, appealing to Latinate principles of civil law and demanding of unusually skilled powers of comprehension and patience — they are required by regulation to be, in fact — but when it comes down to it, they all say the same thing: that close-out netting is, ultimately, enforceable: because a netting opinion would have no reason to exist if it said anything else.
And so, the netting opinion will say what you know to be true, at gruesome length, clothed in ambiguity and decorated with its own peculiary vocabulary. For example, to utter the following confection in any other context would be to invite a bunch of fives, but it will go unchallenged in a Continental netting opinion:
- “According to legal literature, forward contracts (marchés a terme) are synallagmatic (that is, the parties enter into mutual commitments, each binding itself to the other) and onerous contracts (that is, one party gives or promises something as a consideration for the commitment of the other party) and contain an aleatory element (contrat aléatoire).”[1]
But God — manifesting Herself in the shape of the Basel Committee on Banking Regulations and Supervisory Practices, plays a cruel cosmic joke on all inhouse lawyers. By diktat of the latest Basel Accord) they must diligently read and draw reasoned conclusions from these God-forsaken tomes, so that their firm's financial controllers can recognise balance sheet reductions as a result.
Red Flag Act
Also, it is a fact, that no insolvency administrator, anywhere in the world, in the history of the world, has ever actually successfully challenged the netting down of offsetting transactions under a derivative trading agreement — or so far as this commentator knows, even tried to — because that would be a patently stupid thing to do, even by accident.
See also
References
- ↑ What this seems to be saying is these arrangements involve mutual obligations and consideration — in other words, they are “legal contracts”, and the parties address themselves to a chance (“aleatory”) element outside their mutual control: that is, they’re “derivative contracts”.