83,229
edits
Template:M summ 2018 CSD 13(h): Difference between revisions
Jump to navigation
Jump to search
no edit summary
Amwelladmin (talk | contribs) No edit summary |
Amwelladmin (talk | contribs) No edit summary |
||
| Line 8: | Line 8: | ||
All this provision does is describe ''when'' a {{imcsdprov|Secured Party}} can actually take the [[initial margin]] the {{imcsdprov|Custodian (IM)}} is holding for it. | All this provision does is describe ''when'' a {{imcsdprov|Secured Party}} can actually take the [[initial margin]] the {{imcsdprov|Custodian (IM)}} is holding for it. | ||
You should not be surprised to hear this should be, more or less, ''when the Chargor has actually defaulted and been closed out'' — and, really, the control of secured collateral held under {{imcsdprov|Control Agreement}} would ordinarily be most suitably dealt ''by that {{imcsdprov|Control Agreement}}''. The clue, surely, is in the name? | You should not be surprised to hear this should be, more or less, ''when the {{imcsdprov|Chargor}} has actually defaulted and been closed out'' — and, really, the control of secured collateral held under {{imcsdprov|Control Agreement}} would ordinarily be most suitably dealt ''by that {{imcsdprov|Control Agreement}}''. The clue, surely, is in the name? | ||
Until the {{isdama}} has been fully closed out and the {{isdaprov|Early Termination Amount}} — that is, the total amount due following termination and valuation of all {{isdaprov|Transaction}}s following the default — determined, you don’t definitively know what you are owed, so what business have you got appropriating the Initial Margin? Nor do you have any credit risk over it: it is held at a third party and secured in your favour. ''Cool your jets''. | Until the {{isdama}} has been fully closed out and the {{isdaprov|Early Termination Amount}} — that is, the total amount due following termination and valuation of all {{isdaprov|Transaction}}s following the default — determined, you don’t definitively know what you are owed — even ''if'' you are owed anything: only one party to an {{isdama}} can be owed something, remember — so until then, what business have you got appropriating the {{imcsdprov|Initial Margin}}? Nor do you have any credit risk over it: it is held at a third party and [[secured]] in your favour. ''Cool your jets''. | ||
But that event — by our read, a “Failure to Pay Early Termination Amount” — isn’t even the default value for a {{imcsdprov|Secured Party Rights Event}}: rather, it is one of a tangled menu of alternatives. | |||
===Default value: designated Early Termination Date=== | |||
The as-standard Secured Party Rights Event in the {{imcsd}} is the designation of an {{isdaprov|Early Termination Date}} in respect of all {{isdaprov|Transaction}}s following an {{isdaprov|Event of Default}} but — unless designated as an “{{imcsdprov|Access Condition}}” — not a ''normal'' {{isdaprov|Termination Event}} or an [[Additional Termination Event - ISDA Provision|''Additional'' Termination Event]]. Just as a piece of design this is cruddy: it should be any event leading to the early termination of all outstanding {{isdaprov|Transaction}}s, since at that point you are off risk, right? And before you complain that this is too wide, since there may still be amounts undetermined, or not as yet due under those transactions, well, yes: that is exactly why the {{isdaprov|Early Termination Date}} is the wrong trigger point in the first place. | |||
Why do you ''need to appropriate {{imcsdprov|Initial Margin}} before you know if you are actually owed anything? | |||
But having a legal agreement that said something that straightforward would be too easy, and not nearly circuitous enough. How are you meant to keep armies of [[legal eagle]]s employed if it is as straightforward as that? | But having a legal agreement that said something that straightforward would be too easy, and not nearly circuitous enough. How are you meant to keep armies of [[legal eagle]]s employed if it is as straightforward as that? | ||