Scope of Agreement - ISDA Provision

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2002 ISDA Master Agreement

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scope of agreement in a Nutshell™

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Original text

Plain version

Scope of Agreement: Upon the effectiveness of this Agreement all existing swap, option, forward, foreign exchange, index, metal or similar transactions between the parties will be Transactions governed by this Agreement and any confirmation of such a transaction will be a Confirmation.

Nervous version

Scope of Agreement. Notwithstanding anything contained in this Agreement to the contrary, any transaction which may otherwise constitute a “Specified Transaction” for purposes of this Agreement which has been or will be entered into between the parties shall constitute a “Transaction” which is subject to, governed by, and construed in accordance with the terms of this Agreement, unless any Confirmation with respect to a Transaction entered into after the execution of this Agreement expressly provides otherwise. Transactions which are deemed to be covered by another internationally recognised master agreement will be excluded from this clause.

Paranoid version

Scope of Agreements: This Agreement shall supersede all agreements between the parties entered into prior to the date of execution of this Agreement governing the terms of any Specified Transaction between the parties and all confirmations relating to such Specified Transactions shall supplement, form part of, and be subject to this Agreement, such confirmations shall be Confirmations hereunder and such Specified Transactions shall be Transactions hereunder.

All Specified Transactions entered into between the parties shall be Transactions hereunder other than any Specified Transactions the Confirmation for which is dated after the date of this Agreement and specifies that it is to be governed by an ISDA Master Agreement other than this Master Agreement.

See ISDA Comparison for a comparison between the 1992 ISDA and the 2002 ISDA.
The Varieties of ISDA Experience
Subject 2002 (wikitext) 1992 (wikitext) 1987 (wikitext)
Preamble Pre Pre Pre
Interpretation 1 1 1
Obligns/Payment 2 2 2
Representations 3 3 3
Agreements 4 4 4
EODs & Term Events 5 Events of Default: FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events: Illegality • FM • Tax Event • TEUM • CEUM • ATE 5 Events of Default: FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events: Illegality • Tax Event • TEUM • CEUM • ATE 5 Events of Default: FTPD • Breach • CSD • Misrep • DUSS • Cross Default • Bankruptcy • MWA Termination Events: Illegality • Tax Event • TEUM • CEUM
Early Termination 6 Early Termination: ET right on EOD • ET right on TE • Effect of Designation • Calculations; Payment Date • Payments on ET • Set-off 6 Early Termination: ET right on EOD • ET right on TE • Effect of Designation • Calculations • Payments on ET • Set-off 6 Early Termination: ET right on EOD • ET right on TE • Effect of Designation • Calculations • Payments on ET
Transfer 7 7 7
Contractual Currency 8 8 8
Miscellaneous 9 9 9
Offices; Multibranch Parties 10 10 10
Expenses 11 11 11
Notices 12 12 12
Governing Law 13 13 13
Definitions 14 14 14
Schedule Schedule Schedule Schedule
Termination Provisions Part 1 Part 1 Part 1
Tax Representations Part 2 Part 2 Part 2
Documents for Delivery Part 3 Part 3 Part 3
Miscellaneous Part 4 Part 4 Part 4
Other Provisions Part 5 Part 5 Part 5

Resources and Navigation

Index: Click ᐅ to expand:
ISDA

Comparisons

This is a bespoke clause added to Part 5 of the Schedule so there is no meaningful comparison, but I have two versions of the clause for your viewing pleasure.

Basics

The minds of ISDA negotiators, and even more so credit officers, are beset by phantoms, bats, ticks and other unmentionables, sucking the life juices from them as they sleep, or should they for a moment drop their guards.

One particular kind of succubus is the random capital markets transaction, flitting around, unattached to the ISDA or any other master agreement, unnettable, and wildly consumptive of risk limits, balance sheet and regulatory capital.

Exactly what these transactions are, and who enters them, is difficult to say. “That,” says our fearful young credit officer, “is precisely the point.”

In this day and age, they will be very few and far between. DVP brokerage settlements. Spot and very short-dated FX trades done under terms of business. Swap trades executed under long-form confirmations — though there should be none of these if you have an ISDA. But perhaps a few still linger darkly from your cavalier days before you inked a Single Agreement.

If, in your organisation, there are transactions like that, flitting around, beating their wings angrily on your window pane and disrupting your night’s rest, then this provision is for you. It gathers up all those orphan transactions and sweeps them under the comforting matronly rug of the ISDA. They no longer need to be Specified Transactions: now they are grown-up, fully fledged Transactions intheir own right under the ISDA. Default is now a direct Event of Default under the ISDA Master Agreement: no longer must you rely on the proxy of DUST.

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See also

References

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