Template:Close out netting under 1987 isda: Difference between revisions

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-===[[Close-out netting]] under the {{1987isda}}===
+====Close-out netting under the 1987 ISDA====
 It can be done, but tread carefully: the somewhat agricultural {{isdaprov|Automatic Early Termination}} provision may cause problems. Generally speaking:
-*'''Physical settlement''': given that the {{1987ma}} doesn't include [[physical delivery]] provisions, if you have any physically settled trades under it, you’d need to add boilerplate language in the master to ensure the close-out mechanic worked for them.
+*'''Physical settlement''': given that the {{1987ma}} doesn’t include [[physical delivery]] provisions, if you have any physically settled trades under it, you’d need to add boilerplate language in the master to ensure the close-out mechanic worked for them.
 *'''{{isda87prov|Bankruptcy}} and {{isda87prov|Automatic Early Termination}}''': section {{isda87prov|5(a)(vii)}} is loosely drafted and includes events which it may be difficult to determine with accuracy (esp. subsections (2), (7), and (8). This would be okay, except for the way {{isda87prov|Automatic Early Termination}} works under the {{1987isda}}:
 **it happens by default (by contrast, in the {{1992isda}} and {{2002isda}} it is an election, and you would only apply it to counterparties in those jurisdictions where it was needed to ensure [[close-out netting]])
 **it happens by reference to '''all''' of the limbs of the {{isda87prov|Bankruptcy}} definition, including those which are observable and definitive. [[AET]] shouldn't kick in simply where a party "takes steps in furtherance of" an insolvency filing - it should only happen at the point of that actual insolvency filing.
 **That is to say the second sentence of Section {{isda87prov|6(a)}} (see below) deems the occurrence of an {{isdaprov|Early Termination Date}} ''automatically'' upon the occurrence of ''any'' event falling within the {{isda87prov|Bankruptcy}} definition.
-By contrast, {{isdaprov|Automatic Early Termination}} under the {{1992ma}} and {{2002ma}} does not apply to those events that are uncertain as to the precise time of their occurrence. Therefore, the enforceability of {{isdaprov|Automatic Early Termination}} in the {{1992ma}} and the {{2002ma}} cannot be called into question on the basis of the uncertainty created by the inclusion of the events in the {{1992ma}} and {{2002ma}} equivalent to those in the {{1987ma}} referred to above.
+By contrast, {{isdaprov|Automatic Early Termination}} under the {{1992ma}} and {{2002ma}} does not apply to those events that are uncertain as to the precise time of their occurrence. Therefore, the enforceability of {{isdaprov|Automatic Early Termination}} in the {{1992ma}} and the {{2002ma}} cannot be called into question based on the uncertainty created by the inclusion of the events in the {{1992ma}} and {{2002ma}} equivalent to those in the {{1987ma}} referred to above.