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{{Dust capsule|{{{1}}}}} | {{Dust capsule|{{{1}}}}} | ||
===Voltaire and [[DUST]]=== | ===Voltaire and [[DUST]]=== | ||
In which {{icds}} got bogged down in the weeds once in [[1987 ISDA Interest Rate and Currency Exchange Agreement|1987]], doubled down in their in-weed | In which {{icds}} got bogged down in the weeds once in [[1987 ISDA Interest Rate and Currency Exchange Agreement|1987]], doubled down in their in-weed bogged-downness in [[2002 ISDA Master Agreement|2002]], and we’ve been dealing with resulting confusion ever since. A case of [[Voltaire’s maxim|perfection being the enemy of good enough]], as Voltaire would say, in the [[JC]]’s humble opinion, especially in these modern times where, thanks to compulsory daily zero-threshold [[variation margin]]ing, [[DUST]] is even more of a dead letter than it even was in the good old days. To our knowledge, no {{isdama}} in history has been closed out using, ''exclusively'', Section {{{{{1}}}|5(a)(v)}}. | ||
That said, the {{92isda}} version is a bit skew-wiff as regards mini-closeout, and you may find assiduous counterparties hungrily licking their lips at the prospect of a hearty negotiation about this bald man’s comb. | |||
We are talking about other derivative-''like'' transactions, between you and the same counterparty, where the counterparty presents a clear and present danger of blowing up, but where that behaviour has not yet manifested under the present {{isdama}}, meaning you have no grounds to blow them up directly. So, you know, fairly implausible scenario, but still. You want to use the event arising under this ''other'' {{{{{1}}}|Specified Transaction}} to detonate the present ISDA. [[The squad]] breaks your ability to do so down in to four scenarios: | We are talking about other derivative-''like'' transactions, between you and the same counterparty, where the counterparty presents a clear and present danger of blowing up, but where that behaviour has not yet manifested under the present {{isdama}}, meaning you have no grounds to blow them up directly. So, you know, fairly implausible scenario, but still. You want to use the event arising under this ''other'' {{{{{1}}}|Specified Transaction}} to detonate the present ISDA. [[The squad]] breaks your ability to do so down in to four scenarios: | ||
*Counterparty fails to pay amounts falling due ''before'' maturity on a {{{{{1}}}|Specified Transaction}}, and you [[accelerate]] ''that'' transaction, but not necessarily others under the same [[master agreement]]. Here the principle is that ''any'' obligation to pay a sum of money on time is [[Fundamental breach|fundamental]], [[Time is of the essence|of the essence]] and speaks indelibly to a merchant’s credit, whether or not one accelerates other related Specified Transactions (though, actually, walk me through the scenarios in which you wouldn’t, or even weren’t ''obliged'' to?) | *Counterparty fails to pay amounts falling due ''before'' maturity on a {{{{{1}}}|Specified Transaction}}, and you [[accelerate]] ''that'' transaction, but not necessarily others under the same [[master agreement]]. Here the principle is that ''any'' obligation to pay a sum of money on time is [[Fundamental breach|fundamental]], [[Time is of the essence|of the essence]] and speaks indelibly to a merchant’s credit, whether or not one accelerates other related Specified Transactions (though, actually, walk me through the scenarios in which you wouldn’t, or even weren’t ''obliged'' to?) | ||
*Counterparty fails to pay amounts falling due ''at'' maturity on a {{{{{1}}}|Specified Transaction}}, so you can’t “accelerate” as such on ''that'' {{{{{1}}}|Specified Transaction}}, as it has matured, but you are still out of pocket and of a mind to press a big red button; | *Counterparty fails to pay amounts falling due ''at'' maturity on a {{{{{1}}}|Specified Transaction}}, so you can’t “accelerate” as such on ''that'' {{{{{1}}}|Specified Transaction}}, as it has matured, but you are still out of pocket and of a mind to press a big red button; | ||
*Counterparty [[Failure to deliver|fails to ''deliver'']] assets due under a {{{{{1}}}|Specified Transaction}}, and as a result you accelerate '''''all''''' {{{{{1}}}|Specified Transaction}}s under the affected [[master agreement]] (ie not just ''that'' transaction) — this is designed to carve out things like [[mini close-out]] under a {{gmsla}} as these are not credit-related; | *Counterparty [[Failure to deliver|fails to ''deliver'']] assets due under a {{{{{1}}}|Specified Transaction}}, and as a result you accelerate '''the''' Specified Transation ({{1992isda}}) or '''''all''''' {{{{{1}}}|Specified Transaction}}s under the affected [[master agreement]] (ie not just ''that'' transaction) ({{2002isda}} — this is designed to carve out things like [[mini close-out]] under a {{gmsla}} as these are not credit-related; | ||
*Counterparty [[Repudiation|presents you an extended middle finger]] generally with regard to any obligation under any Specified Transaction, whether you accelerate it or not. Here if your counterparty is playing craziest dude in the room, it has committed a [[repudiatory breach]] thereby losing what moral high-ground it might otherwise stand on to expect you to follow form and protocol before closing it out. | *Counterparty [[Repudiation|presents you an extended middle finger]] generally with regard to any obligation under any Specified Transaction, whether you accelerate it or not. Here if your counterparty is playing craziest dude in the room, it has committed a [[repudiatory breach]] thereby losing what moral high-ground it might otherwise stand on to expect you to follow form and protocol before closing it out. | ||