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Like all good stories, the ISDA starts with a {{ {{{1}}}|Preamble}}. Everyone, once, stares at that gnomic title and thinks, “okay, what the hell is ''this'' all about?” | Like all good stories, the ISDA starts with a {{ {{{1}}}|Preamble}}. Everyone, once, stares at that gnomic title and thinks, “okay, what the hell is ''this'' all about?” | ||
The {{{{{1}}}|preamble}} is just the loosener before things get properly going, and there is not a lot to see. It has not changed a lot between the {{1992ma}} and the {{2002ma}} (nor indeed, from the {{1987ma}}, except that the {{isdaprov|Single Agreement}} clause got promoted from a casual remark during the warm-up, in the {{1987ma}}, to the first searching delivery of the first over.<ref>Cricket metaphor. To our American readers, we would say sorry, except that we are not. There will be cricket analogies throughout.</ref> | The {{{{{1}}}|preamble}} is just the loosener before things get properly going, and there is not a lot to see. It has not changed a lot between the {{1992ma}} and the {{2002ma}} (nor indeed, from the {{1987ma}}, except that the {{isdaprov|Single Agreement}} clause got promoted from a casual remark during the warm-up, in the {{1987ma}}, to the first searching delivery of the first over by the {{1992ma}}.<ref>Cricket metaphor. To our American readers, we would say sorry, except that we are not. There will be cricket analogies throughout.</ref> | ||
The {{isdama}} is the basic framework that applies to anyone who touches down on planet [[ISDA]]. | |||
The {{isdama}} is the basic framework that applies to anyone who touches down on planet [[ISDA]]. | |||
All usable versions of the ISDA have a tri-partite form: '''Pre-printed Master''', '''{{{{{1}}}|Schedule}}''', '''{{{{{1}}}|Confirmation}}''' and — well, ''this'' is controversial: for is it, or is it not, part of the {{isdama}}? — '''[[Credit Support Annex]]'''. | |||
There are three versions still conceivably in use: | |||
======{{2002ma}}====== | ======{{2002ma}}====== | ||
The still, after all these years, state-of-the-art {{2002ma}}. This is the most popular version — it took industry participants | The still, after all these years, state-of-the-art {{2002ma}}. This is the most popular version — it took industry participants an ''awfully'' long time to get comfortable with it, despite its innovations being largely sensible, but now most of the European and Asian markets trade on the {{2002ma}}, and we sense even the Americans are coming to reluctant terms with it. | ||
======{{1992ma}}====== | ======{{1992ma}}====== | ||
The first really global, earth-shaking version of the ISDA master | The {{1992ma}} was the first really global, pan-transactional, earth-shaking version of the ISDA master agreement. It is still popular with traditionalists, those who can’t abide a one-day grace period for {{{{{1}}}|Failure to Pay or Deliver}}, and Americans. | ||
Until quite recently a good part of the American market was still on the {{1992ma}}, although most of those heavily modified to take in most of the innovations of the {{2002ma}}, to the point where the refusal to budge looks to be largely down to the colossal weight of institutional inertia, of just basic bloody-mindedness. But the anecdotal sense we have is that even in New York, these days, the {{2002ma}} is the master agreement of choice for the discerning ninja. | |||
The fact that there is ''so'' much institutional reluctance to update to a new agreement should tell us a good deal, both good and bad, about how people in the financial services industry behave, and how quickly things really change. | |||
Perhaps had the {{2002ma}} been ''more'' radical it might have stood a greater chance of adoption. On the other hand, the further the fruit falls from the tree, the greater chance of outright failure. Just ask “[[Flight 19]]”, the poor, doomed Linklaters team who drafted the [[2011 ISDA Equity Derivatives Definitions|2011 Equity Derivatives Definitions]]. | |||
======{{1987ma}}====== | ======{{1987ma}}====== | ||
The | The [[1987 ISDA Interest Rate and Currency Exchange Agreement]] — it wasn’t, by name, a comprehensive master agreement — is all but a dead letter now. But, we sense, not ''quite''. | ||
Just as there are still soldiers in the Burmese jungle fighting the Second World War, through inattention or truculence there may be pockets, embedded deep in the impassable hinterlands of structured finance who still cling to the {{1987ma}}, notwithstanding its well-recognised shortcomings. If you come across one of these, proceed with caution: {{1987ma}}s don’t have a lot of safety features a modern derivatives counterparty relies on, so are only for real die-hard vinyl junkies and weirdos. | |||
=====Non-functional versions===== | =====Non-functional versions===== | ||
There are two non-functional versions: | There are two non-functional versions: | ||
Oh, all right there ''isn’t'' a {{2008ma}}. Never was. | '''{{1985ma}}''': These days interesting only for its place in the fossil record — and a witty acrostic that points to a playfulness among the [[First Men]] that has long since vanished, the {{1985ma}} was out of use well before the millennium. The JC only found out about it when visiting a retired ninja in a care home in 2015, and at first assumed it was some sort of urban myth or in-joke. But apparently not. | ||
'''{{2008ma}}''': The [[2008 ISDA Decentralised Automomous Agreement]] — a “this-fixes-everything, [[Blockchain|on-chain]], [[Smart contract|smart]], [[artificially intelligent]]” was introduced during, and tragically destroyed by, the [[Global Financial Crisis]]. | |||
Oh, all right there ''isn’t'' a {{2008ma}}. Never was. This one ''is'' a running [[JC]] in-joke. Talking to yourself might not be the first sign of madness, but having ''in-jokes'' with yourself might be. | |||
====Industry associations==== | ====Industry associations==== | ||
ISDA, which publishes the ISDA, ''was'' the “International Swap Dealers Association''s'', Inc.” — interesting plural, that — but in any case, outwardly a ''[[sell-side]]'' industry association. Sometime between 1992 and 2002, it rebranded itself as the “International Swaps and Derivatives Association, Inc.”: singular, at the same time more unitary and more inclusive sounding, but still in spirit the same old ISDA, stake-held predominantly by the largest broker-dealers on the face of the Earth. | ISDA, which publishes the ISDA, ''was'' the “International Swap Dealers Association''s'', Inc.” — interesting plural, that — but in any case, outwardly a ''[[sell-side]]'' industry association. Sometime between 1992 and 2002, it rebranded itself as the “International Swaps and Derivatives Association, Inc.”: singular, at the same time more unitary and more inclusive sounding, but still in spirit the same old ISDA, stake-held predominantly by the largest broker-dealers on the face of the Earth. | ||
It may have aspirations to conquer the world — increasingly, it seems hell-bent on doing so, encroaching on the commodities, carbon, securities financing and crypto domains — but for now ISDA remains a “dealer-community” association, largely devoted to the swap. | It may have aspirations to conquer the world — increasingly, it seems hell-bent on doing so, encroaching on the commodities, carbon, securities financing and crypto domains — but for now ISDA remains a “dealer-community” association, largely devoted to the swap. | ||
These days the “buy-side lobby” is bigger, more organised and better represented than it used to be, with the following associations representing its interests: | These days the “buy-side lobby” is bigger, more organised and better represented than it used to be, with the following associations representing its interests: | ||