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Template:Isda 2(a)(iii) summ: Difference between revisions
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This can lead to some unfortunate surprises: the counterparty who, faced with a massive counterparty failure, and diligently files its notice of {{{{{1}}}|Failure to Pay or Deliver}}, only to find that, last week some clot in Collateral Ops mis-keyed a small yen payment or just effected a net settlement that the counterparty didn’t match, meaning that none of the “failing payments” were actually due in the first place. Expect a race back in time to see who committed the earliest unremedied non-payment. | This can lead to some unfortunate surprises: the counterparty who, faced with a massive counterparty failure, and diligently files its notice of {{{{{1}}}|Failure to Pay or Deliver}}, only to find that, last week some clot in Collateral Ops mis-keyed a small yen payment or just effected a net settlement that the counterparty didn’t match, meaning that none of the “failing payments” were actually due in the first place. Expect a race back in time to see who committed the earliest unremedied non-payment. | ||
===When does it apply=== | |||
Note also that [[the ’squad]] neglected to prescribe the precise point in time at which the condition precedent must apply. Common sense surely requires it be measured as at close of business on the {{{{{1}}}|Business Day}} on which the payment or delivery is originally scheduled to be performed. But it doesn’t take the trouble to say that. So what if, some time after the due date for payment, but, say, before the [[grace period]] for a Failure to Pay or Deliver has expired, the hitherto {{{{{1}}}|non-Defaulting Party}} falls into, say, technical insolvency (perhaps as a result of the putatively {{{{{1}}}|Defaulting Party}}’s failure? Is the miscreant original defaulter saved from the jaws of oblivion by such a jammy hap? We think not — surely, it ''should'' not, though one could no doubt construct the intellectual justification why it might — but uncharacteristic slackness with words from {{icds}} makes the situation less clear than it could be. | |||
Our read, for all that is worth: a party is only entitled to suspend payments under {{{{{1}}}|2(a)(iii)}} if the conditions to payment were unfulfilled on the due date for payment or delivery. That is was when it was bound to pay: that its counterparty’s credit position deteriorated after the due date, but before you have got round to paying it, does not matter. You still gots to pay. | |||
===Speaking of strange days=== | ===Speaking of strange days=== | ||