Other Posted Support (VM) - NY VM CSA Provision

2016 ISDA Credit Support Annex (VM) (New York law) A Jolly Contrarian owner’s manual™ Go premium Overview — Summary — Premium — See also — Wikitext Crosscheck: →NY OG →Eng OG →NY VM →EngVM →Eng IM Other Posted Support in a Nutshell™ The JC’s Nutshell™ summary of this term has moved uptown to the subscription-only ninja tier. For the cost of ½ a weekly 🍺 you can get it here. Sign up at Substack. Original text: “Other Posted Support (VM)” means all Other Eligible Support (VM) Transferred to the Secured Party that remains in effect for the benefit of that Secured Party. The varieties of ISDA CSA Subject 1994 NY 1995 Eng 2016 VM NY 2016 VM Eng 2018 IM Eng Preamble Pre Pre Pre Pre Pre Interpretation 1 1 1 1 1 Security Interest 2 - 2 - 2 Credit Support Obligations 3 2 3 2 3 Transfers, Calculations and Exchanges - 3 - 3 - Conditions Precedent, Transfer Timing, Calculations and Substitutions 4 - 4 - 4 Dispute Resolution 5 4 5 4 5 Holding and Using Posted Collateral 6 - 6 - 6 Transfer of Title, No Security Interest - 5 - 5 - Events of Default 7 6 7 6 7 Rights and Remedies 8 - 8 - 8 Representations 9 7 9 7 9 Expenses 10 8 10 8 10 Miscellaneous 11 9 11 9 11 Definitions 12 10 12 10 12 Elections and Variables 13 11 13 11 13 Resources and Navigation Index: Click ᐅ to expand: 1994 NY CSA 1995 CSA 2016 VM CSA

Overview

The definition is identical for the two New York law security interest CSAs. There is no equivalent in the title transfer CSAs.

Summary

Other Posted Support is to Other Eligible Support as Posted Collateral is to Eligible Collateral: Other Eligible Support provides the universe of allowed forms of non Collateral that can be provided as Credit Support under the CSA; Other Posted Support means the heavenly bodies in that universe that have actually been preferred as Credit Support.

What is this alternative universe, then, and why is it different to Posted Collateral? Well, we think it is things that are not readily transferable, negotiable instruments, but nonetheless function as a credit mitigant. The most obvious is a letter of credit:

Letters of credit

Letters of credit are strange beasts, somewhat out of place in a pure-play derivatives trading world; much more common in the world of trade finance. They are in some senses, a glorified cheque — a letter drawn by a debtor (in this case the “Pledgor”, although it is not actually “pledging” anything here) on its Bank under which the Bank promises unconditionally, and directly to a creditor “beneficiary” to pay a sum of money on demand to the beneficiary at certain times or in certain cases.

Since it is a direct commitment from the bank to the beneficiary it is not, strictly speaking, any kind of security interest granted by the debtor (any more than a cheque would be), hence the the labels “Secured Party” and “Pledgor” in this narrow circumstance are not anatomically accurate, and references to the law and lore of taking security are irrelevant (and in the security interest CSAs are disapplied: See Section 1(b).

Probably not guarantees

Possibly it could include guarantees, too, though these tend to live their own separate lives as Credit Support Documents, and are not “delivered” under a CSA.

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