Specified Transaction - ISDA Provision

ISDA Anatomy™ incorporating our exclusive ISDA in a Nutshell™ Go Premium Template:2002Specified Transaction Definitionisda Template:ISDA Master Agreement 2002Specified Transaction Definition Specified Transaction Definition (view template) {{{{{5}}}isda}} {{ISDA_Master_Agreement {{{5}}} 1992}} ([[Template:ISDA_Master_Agreement_{{{5}}}_1992|view template]]) Index: Click ᐅ to expand: ISDA Navigation The Varieties of ISDA Experience Subject 2002 (wikitext) 1992 (wikitext) 1987 (wikitext) Preamble Pre Pre Pre Interpretation 1 1 1 Obligns/Payment 2 2 2 Representations 3 3 3 Agreements 4 4 4 EODs & Term Events 5 Events of Default FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events Illegality • Tax Event • TEUM • CEUM • ATE • 5 Events of Default FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events Illegality • Tax Event • TEUM • CEUM • ATE • 5 Events of Default FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events Illegality • FM • Tax Event • TEUM • CEUM • ATE • Early Termination 6 Early Termination ET right on EOD • ET right on TE • Effect of Designation • Calculations 6 Early Termination ET right on EOD • ET right on TE • Effect of Designation • Calculations • Set-off 6 Early Termination ET right on EOD • ET right on TE • Effect of Designation • Calculations • Set-off Transfer 7 7 7 Contractual Currency 8 8 8 Miscellaneous 9 9 9 Offices; Multibranch Parties 10 10 10 Expenses 11 11 11 Notices 12 12 12 Governing Law 13 13 13 Definitions 14 14 14 Schedule Schedule Schedule Schedule Termination Provisions Part 1 Part 1 Part 1 Tax Representations Part 2 Part 2 Part 2 Documents for Delivery Part 3 Part 3 Part 3 Miscellaneous Part 4 Part 4 Part 4 Other Provisions Part 5 Part 5 Part 5 Comments? Questions? Suggestions? Requests? Insults? We’d love to 📧 hear from you. Sign up for our newsletter.

Specified Transactions, default under which entitles one to close out the ISDA, excludes Transactions under the ISDA itself. This is for the sensible reason that a default under an ISDA Transaction is covered by elsewhere in the ISDA (eg Failure to Pay or Deliver and Breach of Obligation concepts, and it might lead to a perverse result if a Transaction was not otherwise an Event of default under any ISDA provision but the DUST provision, however unlikely that may be.

The 2002 ISDA expands the basic definition of Specified Transaction to specifically include futures credit derivatives, repo, stock lending, weather derivatives, NDFs, transactions executed under terms of business and other commodities or similar transactions that is presently or in future becomes common in the financial markets.

An odd cognitive dissonance

Note DUST doesn't generally pick up contracts in the nature of 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 to you (though it does cover indebtedness owed to 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.

• Default under Specified Transaction