Scope of this Annex and the Other CSA - VM CSA Provision
2016 VM CSA Anatomy™
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1995 CSA and 2016 VM CSA: click for comparison Covered Transaction: As a concept, “Covered Transaction” only arrived in the 2016 VM CSA, in Paragraph 1(b).
Under the 1995 CSA, the neatest way of describing whether a given set of Transactions is covered or not is to say something like:
“[SPECIFY] Transactions will [not] be relevant for purposes of determining “Exposure” under the 1995 CSA.”
Weird exclusion alert
What is with that exception at the end? Somehow initial margin (“Independent Amount” is just isdaspeak for initial margin, remember) for Covered Transactions under this 2016 VM CSA could be documented under some Other CSA, when you have just gone to tedious lengths to exclude it from having any impact on this 2016 VM CSA?
At first, the JC thought this might be a typo in his transcription of the 2016 VM CSA. But a cursory google suggests no such error on our part. So could this have somehow been missed by the crowd-wisdom of ISDA’s crack drafting squad™?
Again, no: this is deliberate. Why? Because the 2016 VM CSA has no provision at all to deal with initial margin. It being assumed one has put a 2016 VM CSA in place only reluctantly, under protest because the meddling regulator told you to, and that you already had a 1995 CSA which you were happy with, which did have some initial margin provisions. So, since your shiny new 2016 VM CSA has nothing to say about initial margin you continue to levy this under the existing Other CSA.