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==Commentary== | ==Commentary== | ||
==={{1992ma}}=== | ==={{1992ma}}=== | ||
ISDA published a provision in the [[Users Guide]] but several bespoke versions of a set-off provision developed and were used in the market. These often provided for the inclusion of '''{{isdaprov|Affiliate}}s''' in relation to the {{isdaprov|Non-defaulting Party}} or {{isdaprov|Non-affected Party}}. | ISDA published a provision in the [[Users Guide]] but several bespoke versions of a set-off provision developed and were used in the market. These often provided for the inclusion of '''{{isdaprov|Affiliate}}s''' in relation to the {{isdaprov|Non-defaulting Party}} or {{isdaprov|Non-affected Party}}. | ||
==={{2002ma}}=== | ==={{2002ma}}=== | ||
====A slight asymmetry?==== | |||
This provision imagines a world where an {{isdaprov|Early Termination Amount}} is payable one way, and the "{{isdaprov|Other Amounts}}" are all payable in the other way. | |||
{{Box| | |||
*{{isdaprov|Payer}} owes Payee an {{ETA}} of 10 | |||
*{{isdaprov|Payee}} owes {{isdaprov|Payer}} {{isdaprov|Other Amounts}} of 50 | |||
---- | |||
*Net: {{isdaprov|Payee}} owes {{isdaprov|Payer}} 40. | |||
}} | |||
But what if there are {{isdaprov|Other Amounts}} payable the same way as the {{isdaprov|Early Termination Amount}}? | |||
{{Box| | |||
*{{isdaprov|Payer}} owes Payee an {{ETA}} of 10 | |||
*'''{{isdaprov|Payer}} owes Payee {{isdaprov|Other Amounts}} of 40''' | |||
*{{isdaprov|Payee}} owes {{isdaprov|Payer}} {{isdaprov|Other Amounts}} of 50 | |||
---- | |||
*Net: {{isdaprov|Payee}} owes {{isdaprov|Payer}} 40. | |||
* {{isdaprov|Payee}} is an unsecured creditor of {{isdaprov|Payer}} for 40 | |||
}} | |||
They're technically excluded, unless you care to add some dramatically anal language. | |||
====Affiliates==== | |||
The 2002 ISDA contains a standard {{isdaprov|Set-off}} provision which refers to a “Payer” and “Payee”. | The 2002 ISDA contains a standard {{isdaprov|Set-off}} provision which refers to a “Payer” and “Payee”. | ||
*'''Affiliates''': Either the | *'''Affiliates''': Either the “{{isdaprov|Payer}}” or the “{{isdaprov|Payee}}” could be the non-{{isdaprov|Defaulting Party}} or the non-{{isdaprov|Affected Party}} and so to include {{isdaprov|Affiliates}} into the 2002 Definition becomes problematic and cumbersome. Generally the market practice when using a 2002 schedule is therefore: | ||
**'''Where Affiliates are required''': to use bespoke wording; | **'''Where Affiliates are required''': to use bespoke wording; | ||
**'''Where Affiliates are not required''': and then fallback to the 2002 standard wording above. | **'''Where Affiliates are not required''': and then fallback to the 2002 standard wording above. |