82,903
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 13: | Line 13: | ||
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. | 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. | ||
=== | ===The alternatives=== | ||
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]]. | ====As-standard: a “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]]. For what it is worth, “Access Conditions” are a list of Termination Events and Additional Termination Events set out in Paragraph 13(e)(ii) for each of which one can opt — severally for each party — in your elections. What on earth {{iscd}} managed to achieve with such pointless, fine-grained optionality (other than a sumptuous lifestyle for the hoardes of legal eagles who will feast on client negotiations as a result) it is hard to say. | |||
In any case, just as a piece of design this is cruddy: ''any'' event leading to the early termination of all outstanding {{isdaprov|Transaction}}s, should count as a {{imcsdprov|Secured Party Rights Event}}, 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 {{imcsdprov|Transaction}}s, 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? | |||
====Failing that: “{{imcsdprov|Failure to Pay Early Termination Amount}}”==== | |||
(Quick drafting point: this means that a party fails to pay its {{isdaprov|Early Termination Amount}}, not that there is an {{isdaprov|Early Termination Amount}} determined following a {{isdaprov|Failure to Pay of Deliver}} {{isdaprov|Event of Default}}). That being the case, this is — well, if it covered all {{isdaprov|Termination Events}}, would be — the obvious best choice: it means, beyond any doubt the counterparty really has failed, it really did owe something, and it really did fail to pay it. | |||
''Now'' you have all the justification you need to wade in and repossess your counterparty’s initial margin. Only, oddly, it doesn’t capture finally determined {{isdaprov|Early Termination Amount}}s that were caused by ''non''-{{isdaprov|Events of Default}} (the so-called “{{imcsdprov|Access Condition}}s”). Why, since at this point you have failed to pay the amount, and? Search me, readers. | |||
====Failing (or in addition to that: “{{imcsdprov|Access Condition}}s”==== | |||
===Cutting through the nonsense=== | |||
For those who don’t trust {{imcsdprov|Control Agreement}}s to do what they say on the tin, consider this kind of wording: | For those who don’t trust {{imcsdprov|Control Agreement}}s to do what they say on the tin, consider this kind of wording: | ||
{{quote|“'''{{imcsdprov|Secured Party Rights Event}}'''” means that, following the occurrence or designation of an {{isdaprov|Early Termination Date}} with respect to all outstanding {{isdaprov|Transaction}}s, an {{isdaprov|Early Termination Amount}} payable by the {{imcsdprov|Chargor}} has been determined and notified to the {{imcsdprov|Chargor}} under Section {{isdaprov|6(d)}}, and the {{imcsdprov|Chargor}} has not paid it in full when due under Section {{isdaprov|6(d)(ii)}}.}} | {{quote|“'''{{imcsdprov|Secured Party Rights Event}}'''” means that, following the occurrence or designation of an {{isdaprov|Early Termination Date}} with respect to all outstanding {{isdaprov|Transaction}}s, an {{isdaprov|Early Termination Amount}} payable by the {{imcsdprov|Chargor}} has been determined and notified to the {{imcsdprov|Chargor}} under Section {{isdaprov|6(d)}}, and the {{imcsdprov|Chargor}} has not paid it in full when due under Section {{isdaprov|6(d)(ii)}}.}} | ||