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{{Dust capsule|{{{1}}}}} | {{Dust capsule|{{{1}}}}} | ||
===Voltaire and [[DUST]]=== | =====Changes from the 1992 Master Agreement===== | ||
DUST overwent quite a makeover in the {{2002ma}}. For example: | |||
''[[Mini-closeout]] carveout'': Defaults require the [[acceleration]] of just ''the'' {{{{{1}}}|Specified Transaction}} in question (for ''general'' defaults) but off ''all'' outstanding transactions under the relevant [[master agreement]] (for ''[[delivery]]'' defaults). This change was made with [[mini-close-out]] under [[repo]]s and [[stock loan]]s in mind — a concept which the stock loan market invented after the {{1992ma}} was published, so you can’t blame {{icds}} for overlooking it at first — where delivery failures under are common and do not of themselves indicate weakness in the {{{{{1}}}|Defaulting Party}}’s creditworthiness. | |||
''Credit support failures covered'': {{isdaprov|DUST}} under the {{2002ma}} can be triggered by default under a [[credit support arrangement]] relating to a {{isdaprov|Specified Transaction}}. These weren’t included for the {{1992isda}} {{isda92prov|DUST}}. | |||
''Shortened [[cure period]]'': In tune with the general tightening up of cure periods — you know, we’re in a new millennium, computers work properly nowadays, and all that — the [[cure period]] for a failure to make a final or early termination payment on a {{{{{1}}}|Specified Transaction}} has been reduced from ''three'' days to ''one''. This caused many a [[credit officer]] to sadly shake her head and refuse to move to the new agreement. | |||
''[[Repudiation]] evidence'': [[Repudiation]] was modified to add the phrase “...or challenges the validity of ... after “... disaffirms, disclaims, repudiates or rejects ...” to reduce ambiguity as to whether a party’s action constitutes a repudiation. Also, we imagine, by way of stiffening the criteria for what counts as a [[repudiation]], the 2002 requires [[In writing|written evidence]] that the repudiating party has an [[extended middle finger]]. This rules out being able to close out cornered hedge-fund managers, having been “brought to the negotiating table” by their fund’svproximity to a [[NAV trigger]] and who are not enjoying having their “feet held to the fire”, shouting “Well, bugger you, I ''shan’t'' pay, and let’s see how you like ''that''” in the heat of the moment, when they really didn’t ''mean'' it, only to discover they had inadvertently repudiated a contract they were otherwise in perfect compliance with. Of course, no risk officer would dream of closing out an {{isdama}} based on an intemperate oral communication, or the [[proverbial extended middle finger]], for which she could not subsequently prove with fairly compelling evidence. But still. | |||
''Widened definition of {{{{{1}}}|Specified Transaction}}'': The “{{{{{1}}}|Specified Transaction}}” concept has been broadened to include additional transaction types such as [[repo]]s, and to include a catchall clause designed to include any future derivative products that have not been thought of yet. | |||
=====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 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)}}. | 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)}}. | ||