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1987 ISDA Interest Rate and Currency Exchange Agreement: Difference between revisions
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1987 ISDA Interest Rate and Currency Exchange Agreement (view source)
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Nineteen eighty-seven was a different world; the very first swap transaction<ref>Between IBM and the World Bank — see [[swap history]] for more.</ref> was only consummated in 1981. The swap master agreement was a nascent idea to streamline the documentation between counterparties, and to capture this nascent idea of [[close-out netting]], but was basically predicated on the legal precepts of banking facilities. An {{isdama}} is not, of course, any kind of banking facility: certainly not if it is [[Variation margin|daily-margined]], as is now required by regulation for most of the 600 trillion of swaps transacted annually. | Nineteen eighty-seven was a different world; the very first swap transaction<ref>Between IBM and the World Bank — see [[swap history]] for more.</ref> was only consummated in 1981. The swap master agreement was a nascent idea to streamline the documentation between counterparties, and to capture this nascent idea of [[close-out netting]], but was basically predicated on the legal precepts of banking facilities. An {{isdama}} is not, of course, any kind of banking facility: certainly not if it is [[Variation margin|daily-margined]], as is now required by regulation for most of the 600 trillion of swaps transacted annually. | ||
Many of the lending-derived credit concepts in the {{isdama}} are practically redundant, but they hang on — artifacts of the great [[doctrine of precedent|dogma of precedent]]<ref>Did I say “dogma”? I meant doctrine!</ref> | Many of the lending-derived credit concepts in the {{isdama}} are practically redundant, but they hang on — artifacts of the great [[doctrine of precedent|dogma of precedent]].<ref>Did I say “dogma”? I meant doctrine!</ref> If it is in the agreement, it must be there for a reason, and if I cannot conceive of one that must be down to my own mental frailty, rather than the caution or basic fussiness of our forefathers and foremothers. | ||
So if you find something odd, check the [[fossil record]] to see if it has been there from the outset. If it has — for example, the 20-day limit on close out notices under Section {{isda87prov|6(a)}} — then there’s a fair chance the market developments of the last 32 years might have rendered it pointless. | So if you find something odd, check the [[fossil record]] to see if it has been there from the outset. If it has — for example, the 20-day limit on close out notices under Section {{isda87prov|6(a)}} — then there’s a fair chance the market developments of the last 32 years might have rendered it pointless. | ||