Obligations - NY VM CSA Provision

2016 ISDA Credit Support Annex (VM) (New York law) A Jolly Contrarian owner’s manual™ 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: 2016 NY VM CSA Paragraph Obligations in a Nutshell™ Use at your own risk, campers! “Obligations” means all present and future obligations of a party under this Agreement and any of its other obligations as specified in Paragraph 13. view template Full text of Paragraph Obligations “Obligations” means, with respect to a party, all present and future obligations of that party under this Agreement and any additional obligations specified for that party in Paragraph 13. view template Related agreements and comparisons Related Agreements Click here for the text of Section Obligations in the 1994 New York law CSA Click here for the text of Section Obligations in the 1995 English Law CSA Click here for the text of Section Obligations in the 2016 English Law VM CSA Comparisons Template:2nycsadiff Obligations Template:Nycsadiff Obligations Template:Csadiff Obligations Tell me more Sign up for our newsletter — or just get in touch: for ½ a weekly 🍺 you get to consult JC. Ask about it here.

Content and comparisons

’Tis the same as the 2016 NY Law VM CSA as it is in the 1994 NY CSA.

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Summary

Should you want your variation margin CSA to act as security for other obligations your counterparty may owe you, outside the terms of the ISDA, then here is where you make that quixotic quest.

Quixotic why? Because variation margin is calculated — literally calculated, that is, not just forensically calculated —to have a value exactly equal to your counterparty’s net mark-to-market liability to you under the contract, so in the ordinary course, there will be more or less none of it left by the time it comes to recovering other debts owed by the same bankrupted counterparty.

Yes, yes, yes: we know that the market may have moved and there may be some residual value, sure. It might be worth something on that far-off day when that one-in-a-thousand-client event happens and this one blows up. But how much time will you have wasted in negotiation with the other nine-hundred and ninety nine clients in the mean time, for the sake of a shot at a few thousand extra bucks?

So we expect it is unlikely people with much by way of common sense seek to add additional Obligations to their CSAs, but we are sure it is not impossible that some do. Can we imagine, for example, unwilling negotiators being prodded into it by unsmiling credit officers, poking them in the back with a sharpened stick, deaf to the lack of practical value such a manoeuvre offers? Yes. Yes we can.

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See also

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