Difference between revisions of "Preamble - NY VM CSA Provision"

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Revision as of 10:01, 16 January 2020


In a NutshellTM Section Template:Preamblenycsaprov:

Template:Nutshell Preamble NY CSA Preamble view template

Template:Preamblenycsa full text of Section Template:Preamblenycsaprov:

Template:ISDA New York Law Credit Support Annex Preamble Preamble view template

Related Agreements
Click [[Preamble - Template:NotPreambleNY CSA Provision|here]] for the text of Section Template:NotPreamblenycsaprov in the [[Template:NotPreamble NY CSA Anatomy|Template:NotPreamble New York law CSA]]
Click [[{{{3}}} - CSA Provision|here]] for the text of Section [[{{{3}}} - CSA Provision|{{{3}}}]] in the 1995 English Law CSA
Click [[{{{3}}} - VM CSA Provision|here]] for the text of Section [[{{{3}}} - VM CSA Provision|{{{3}}}]] in the 2016 English Law VM CSA
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Differences between CSA versions

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Profound onotological differences

Unlike a title transfer English law CSA which is expressed to be a Transaction under the ISDA Master Agreement, the 2016 NY Law VM CSA is not: it is instead a “Credit Support Document”: a standalone collateral arrangement that stands aloof and apart from the ISDA Master Agreement and all its little diabolical Transactions. The reason for this is — spoiler: it’s not a very good one — because while a English law CSA, by being a title transfer collateral arrangement, necessarily reverses the indebtedness between the parties outright, an 2016 NY Law VM CSA (and, for that matter, an English law English law CSD) does not: it only provides a security interest. The in-the-money counterparty is still in-the-money. It is just secured for that exposure. The outright exposure between the parties does not change as a result of the pledge of credit support.

This is magical, bamboozling stuff — deep ISDA lore — and, at least where rehypothecation is allowed under Paragraph 6(c) of a 2016 NY Law VM CSA — it pretty much always is — it serves no real purpose, because even though you say you are only pledging the collateral, in the the greasy light of commercial reality, from the moment the Secured Party rehypothecates your pledged assets away into the market, dear Pledgor you have transferred your title outright. <ref>