Specified Transaction - ISDA Provision

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2002 ISDA Master Agreement
A Jolly Contrarian owner’s manual™

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Section Specified Transaction in a Nutshell

Use at your own risk, campers!
Specified Transaction” means:
(a) any transaction between the parties to this Agreement (or their respective Credit Support Providers or Specified Entities) which is not governed by this Agreement, but
(i) is a swap, option, forward, foreign exchange, cap, floor, collar, credit protection or spread transaction, repo, buy/sell-back, securities lending, index or forward purchase or sale of a security, commodity or other financial instrument;or
(ii) is a similar transaction forward, swap, future, option or other derivative on any rates, currencies, commodities, financial instruments, benchmarks, indices or other measures of economic risk that is at any time common in the financial markets;
(b) any combination of the above; and
(c) any transaction specified as a Specified Transaction in the Schedule or confirmation.

Full text of Section Specified Transaction

Specified Transaction” means, subject to the Schedule,
(a) any transaction (including an agreement with respect to any such transaction) now existing or hereafter entered into between one party to this Agreement (or any Credit Support Provider of such party or any applicable Specified Entity of such party) and the other party to this Agreement (or any Credit Support Provider of such other party or any applicable Specified Entity of such other party) which is not a Transaction under this Agreement but
(i) which is a rate swap transaction, swap option, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option, credit protection transaction, credit swap, credit default swap, credit default option, total return swap, credit spread transaction, repurchase transaction, reverse repurchase transaction, buy/sell-back transaction, securities lending transaction, weather index transaction or forward purchase or sale of a security, commodity or other financial instrument or interest (including any option with respect to any of these transactions) or
(ii) which is a type of transaction that is similar to any transaction referred to in clause (i) above that is currently, or in the future becomes, recurrently entered into in the financial markets (including terms and conditions incorporated by reference in such agreement) and which is a forward, swap, future, option or other derivative on one or more rates, currencies, commodities, equity securities or other equity instruments, debt securities or other debt instruments, economic indices or measures of economic risk or value, or other benchmarks against which payments or deliveries are to be made,
(b) any combination of these transactions and
(c) any other transaction identified as a Specified Transaction in this Agreement or the relevant confirmation.

Related agreements and comparisons

Related Agreements
Click here for the text of Section Specified Transaction in the 1992 ISDA
Click to compare this section in the 1992 ISDA and 2002 ISDA.

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Content and comparisons

A Specified Transaction under the 1992 ISDA is, by the standards of ISDA’s crack drafting squad™, monosyllabic to the point of being terse.

Under the 2002 ISDA, it is expressed with far more of the squad’s signature sense of derring-do and the Byzantine, expanding the basic definition:



Used in the Default under Specified Transaction Event of Default under Section 5(a)(v) — fondly known to those in the know as “DUST”.

Credit support annexes?

We are going to go out on a limb here and say that little parenthetical “(including an agreement with respect to any such transaction)” is, if not deliberately designed that way, is at least calculated[2] to capture failures under a credit support annex which, yes, is a Transaction under an ISDA Master Agreement but no, is not really a swap or anything really like one.

There is enough chat about Credit Support Providers (yes, yes, the counterparty itself is of course not a Credit Support Provider) to make us think, on a fair, large and liberal interpretation, that a default under the CSA to a swap Transaction is meant to be covered.


Specified Transactions are those financial markets transactions between you and your counterparty other than those under the present ISDA Master Agreement, default under which justifies the wronged party closing out the present ISDA. “Specified Transactions” therefore specifically exclude Transactions under the ISDA itself for the sensible reason that a default under those is covered by by Failure to Pay or Deliver and Breach of Obligation. It might lead to a perverse result if misadventure under an ISDA Master Agreement Transaction which did not otherwise amount to an Event of Default, became one purely as a result of the DUST provision, however unlikely that may be.

Enter the fiddlers

ISDA’s verbal profligacy won’t stop enthusiastic credit officers amplifying the list even further, of course. What about precious metal transactions? Letter of credit reimbursement obligations? Indebtedness? What indeed?

An odd cognitive dissonance

The framers of DUST deliberately neglected to include borrowed money or indebtedness, because these are picked up under the wider scope of the Cross Default provision which, of course, applies to indebtedness your counterparty owes to anyone, not just you. Still, there is weirdness: Cross Default contemplates a Threshold Amount before it can be triggered. DUST doesn’t. So this leads to an odd gap:

  • A (sub Threshold Amount) default under Specified Indebtedness between the two contractual parties would not entitle the innocent party to close out;
  • A default under any other Specified Transaction between them would even if a smaller quantum of default. This is kind of counterintuitive. If you were to define DUST to include indebtedness, of course, you'd be covered.

General discussion

Template:M gen 2002 ISDA Specified Transaction


See also



  1. Oh, look! Anyone remember Enron? Anyone feeling nostalgic for the good old days when men were men, fraud was fraud, financial accountants were profit centres and anything seemed possible? No?
  2. In the sense of being “likely”.