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One from the [[tricks for young players]] department. | One from the [[tricks for young players]] department. | ||
Say you have some awkward client who insists on a right to meet a credit support | Say you have some awkward client who insists on a right to meet a [[credit support]] payments some other way? For example, by terminating other [[in-the-money]] {{{{{1}}}|Transactions}}, in lieu of ponying up cold, hard, folding spondoolies. Does this convert a hardcore payment obligation into something more vapid, vague and fluffy? Something that the failure to effectively carry out doesn’t quite qualify as a {{{{{1}}}|Failure to Pay or Deliver}}? | ||
{{{{{1}}}|Transactions}}, in lieu of ponying up cold, hard, folding spondoolies. Does this convert a hardcore payment obligation into something more vapid, vague and fluffy? Something that the failure to effectively carry out doesn’t quite qualify as a {{{{{1}}}|Failure to Pay or Deliver}}? | |||
“Look, I know I didn’t meet my [[variation margin]], but, Sir, your honour, I didn’t have to actually ''pay'' it. I was allowed to terminate something else ''in lieu''. So while I ''could'' have sorted this all out with a payment — and I think we can all agree that might have been the most sensible thing to do — and I ''was'' obliged to sort this out ''somehow'', I wasn’t ''obliged'' to sort it out ''with a payment''. Sir. Your honour.” | {{quote|“Look, I know I didn’t meet my [[variation margin]], but, Sir, your honour, I didn’t have to actually ''pay'' it. I was allowed to terminate something else ''in lieu''. So while I ''could'' have sorted this all out with a payment — and I think we can all agree that might have been the most sensible thing to do — and I ''was'' obliged to sort this out ''somehow'', I wasn’t ''obliged'' to sort it out ''with a payment''. Sir. Your honour.”}} | ||
Why might this matter? Isn’t it an {{{{{1}}}|Event of Default}} either way? What difference does it make whether it was a {{{{{1}}}|Breach of Agreement}} or a {{{{{1}}}|Failure to Pay or Deliver}}? | Why might this matter? Isn’t it an {{{{{1}}}|Event of Default}} either way? What difference does it make whether it was a {{{{{1}}}|Breach of Agreement}} or a {{{{{1}}}|Failure to Pay or Deliver}}? | ||
I can already see hands shooting up from the [[ISDA ninja]]s in the front row. And yes, my little ''tricoteuses'', you are right. ''[[Grace period]]s''. That is the difference. A {{{{{1}}}|Failure to Pay or Deliver}} has a grace period of ''one'' day.<ref>''Three'' if you are one of those antediluvian types on a {{1992ma}}.</ref> A {{{{{1}}}|Breach of Agreement}} has a ''thirty'' day grace period. Even the hyenas will have given up and gone home by then. | I can already see hands shooting up from the [[ISDA ninja]]s in the front row. And yes, my little ''tricoteuses'', you are right. ''[[Grace period]]s''. That is the difference. A {{{{{1}}}|Failure to Pay or Deliver}} has a grace period of ''one'' day.<ref>''Three'' if you are one of those antediluvian types on a {{1992ma}}.</ref> A {{{{{1}}}|Breach of Agreement}} has a ''thirty'' day grace period. Even the hyenas will have given up and gone home by then. | ||