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'''{{{{{1}}}prov|Valuation Time}} - {{{{{1}}}prov|Eligible Credit Support}}'''<br> | '''{{{{{1}}}prov|Valuation Time}} - {{{{{1}}}prov|Eligible Credit Support}}'''<br> | ||
Per para {{{{{1}}}prov|2(a)}} the Transferor will transfer {{{{{1}}}prov|Eligible Credit Support}} having a {{{{{1}}}prov|Value}} equal to the {{{{{1}}}prov|Delivery Amount}} ''as of the date of transfer''. Under the {{{{{1}}}prov|Calculations}} provision all calculations of {{{{{1}}}prov|Value}} happen at the relevant {{{{{1}}}prov|Valuation Time}}. Fluctuations in value in the credit support actually delivered | Per para {{{{{1}}}prov|2(a)}} the Transferor will transfer {{{{{1}}}prov|Eligible Credit Support}} having a {{{{{1}}}prov|Value}} equal to the {{{{{1}}}prov|Delivery Amount}} ''as of the date of transfer''. Under the {{{{{1}}}prov|Calculations}} provision all calculations of {{{{{1}}}prov|Value}} happen at the relevant {{{{{1}}}prov|Valuation Time}}. Fluctuations in value in the credit support actually delivered after that time won’t invalidate the transfer amount, but they may mean a party can immediately call for more {{{{{1}}}prov|Credit Support}} (that is, have ''another'' Demand Date). | ||
'''{{{{{1}}}prov|Transfer Date}}'''<br> | '''{{{{{1}}}prov|Transfer Date}}'''<br> | ||
Under para {{{{{1}}}prov|3(a)}} ({{{{{1}}}prov|Transfers}}) if the demand is received ''before'' the {{{{{1}}}prov|Notification Time}} | Under para {{{{{1}}}prov|3(a)}} ({{{{{1}}}prov|Transfers}}) if the demand is received ''before'' the {{{{{1}}}prov|Notification Time}} on a {{{{{1}}}prov|Local Business Day}}) on that Demand Date, the transfer will be made not later than [[close of business]] on the related {{csaprov|Settlement Day}} (under the {{csa}}) or [[Regular Settlement Day - VM CSA Provision|''Regular'' Settlement Day]] (under the {{vmcsa}}. If received ''after'' the {{{{{1}}}prov|Notification Time}}, or at any time on day that isn’t a {{{{{1}}}prov|Local Business Day}}), the transfer must be made by close of business on the {{csaprov|Settlement Day}}/{{vmcsaprov|Regular Settlement Day}} relating to the day (note: ''ordinary'' day, ''not'' {{{{{1}}}prov|Local Business Day}}) ''after'' the Demand Date. <br> | ||
'''{{csaprov|Settlement Day}}'''<br> | '''{{csaprov|Settlement Day}}'''<br> | ||
Here is where things differ | Here is where things differ materially between the {{csa}}and the {{vmcsa}}.<br> | ||
'''{{csa}}''': The {{csaprov|Settlement Day}} for ''any'' day (whether or not it is a {{{{{1}}}prov|Local Business Day}}) is: | '''{{csa}}''': The {{csaprov|Settlement Day}} for ''any'' day (whether or not it is a {{{{{1}}}prov|Local Business Day}}) is: | ||
*'''Cash''': for cash, the next {{{{{1}}}prov|Local Business Day}} and, | *'''Cash''': for cash, the next {{{{{1}}}prov|Local Business Day}} and, | ||
*'''Securities''': for securities, the {{{{{1}}}prov|Local Business Day}} after the date on which a trade in the relevant security, if effected on the day in question, would have been settled in accordance with customary practice. | *'''Securities''': for securities, the {{{{{1}}}prov|Local Business Day}} after the date on which a trade in the relevant security, if effected on the day in question, would have been settled in accordance with customary practice. | ||
'''{{vmcsa}}''': In the new world we have the new concept of the [[Regular Settlement Day - VM CSA Provision|''Regular'' Settlement Day]], and this is the same {{vmcsaprov|Local Business Day}} as the Demand Date. The run-off text at the end of Paragraph {{vmcsaprov|3(a)}} gives you a | '''{{vmcsa}}''': In the new world we have the new concept of the [[Regular Settlement Day - VM CSA Provision|''Regular'' Settlement Day]], and this is the same {{vmcsaprov|Local Business Day}} as the Demand Date. The run-off text at the end of Paragraph {{vmcsaprov|3(a)}} gives you a little more flex: if the demand came after the {{vmcsaprov|Notification Time}}, then you must make the transfer by close on the {{vmcsaprov|Regular Settlement Day}} for the next day.<ref>Just how the business days interact under the ISDA and CSA is about as complicated as string theory, by the way. For a cheat’s guide, see [[How business days work under the CSA]]. You’re welcome!</ref> | ||
===Questions=== | ===Questions=== | ||
'''Demand Date not a {{ | '''Demand Date not a {{{{{1}}}prov|Local Business Day}}'''<br> | ||
What if the Demand Date is not a {{{{{1}}}prov|Local Business Day}}? E.g., what if it is received after the {{{{{1}}}prov|Notification Time}} on a Friday, meaning the {{csaprov|Settlement Day}} takes place on the date on which a trade, effected on a Saturday, would have been settled in accordance with customary practice? | What if the Demand Date is not a {{{{{1}}}prov|Local Business Day}}? E.g., what if it is received after the {{{{{1}}}prov|Notification Time}} on a Friday, meaning the {{csaprov|Settlement Day}} takes place on the date on which a trade, effected on a Saturday, would have been settled in accordance with customary practice? | ||
*'''Securities''': For securities this is ok: a trade effected on a non-business day would be deemed to be effected on the next following Local Business Day anyway, so it would pick this up. | *'''Securities''': For securities this is ok: a trade effected on a non-business day would be deemed to be effected on the next following Local Business Day anyway, so it would pick this up. | ||
*'''Cash''': For cash, not so clear. | *'''Cash''': For cash, not so clear. | ||
'''What happens if the transferred credit support changes in value on the {{ | '''What happens if the transferred credit support changes in value on the {{{{{1}}}prov|Settlement Day}}'''?<br> | ||
'''What happens to {{ | '''What happens to {{{{{1}}}prov|Exposure}}s if the {{{{{1}}}prov|Settlement Day}} is a long time after the Demand Date?'''<ref>As it may well be, under a {{csa}}, if the collateral is corporate [[bond]]s held in a [[clearing system]]</ref> Is the demand, if answered with irrevocable instructions to deliver, treated as having been met, or does the {{{{{1}}}prov|Exposure}} stay outstanding until the collateral actually comes in? The answer (counterintuitive, given that the {{{{{1}}}prov|Transferee}} remains subject to the [[credit exposure]] during this time) is YES, thanks to the definitions of {{{{{1}}}prov|Delivery Amount}} and {{{{{1}}}prov|Return Amount}}, both of which include the words: | ||
{{quote|“...the {{{{{1}}}prov|Value}} as of that {{{{{1}}}prov|Valuation Date}} of the {{{{{1}}}prov|Transferor}}’s {{{{{1}}}prov|Credit Support Balance}} (adjusted to include any prior {{{{{1}}}prov|Delivery Amount}} and to exclude any prior {{{{{1}}}prov|Return Amount}}, the transfer of which, in either case, has not yet been completed and for which the relevant {{ | {{quote|“...the {{{{{1}}}prov|Value}} as of that {{{{{1}}}prov|Valuation Date}} of the {{{{{1}}}prov|Transferor}}’s {{{{{1}}}prov|Credit Support Balance}} (adjusted to include any prior {{{{{1}}}prov|Delivery Amount}} and to exclude any prior {{{{{1}}}prov|Return Amount}}, the transfer of which, in either case, has not yet been completed and for which the relevant {{{{{1}}}prov|Settlement Day}} falls on or after such {{{{{1}}}prov|Valuation Date}}).”}} | ||
This leads to some rather anomalous results. | This leads to some rather anomalous results. |