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Template:M gen 1992 ISDA 5(a)(v): Difference between revisions
Template:M gen 1992 ISDA 5(a)(v) (view source)
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{{isda92prov|DUST}} attaches to a “default” (not defined) under ''any'' {{isda92prov|Specified Transaction}}, not '''''all''''' {{isda92prov|Specified Transaction}}s. But if you have a credit concern with a counterparty under a derivative-like master agreement — even on a failure to pay — you are hardly likely to be closing out some, but not other transactions. Especially not now in these days of compulsory regulatory [[variation margin]]. You’ll be closing out the lot. Yet, with different rules depending on whether its a failure to pay (before or at maturity), failure to deliver or repudiation, we think {{icds}} has made it all a bit fiddly. They may be strictly correct, but come ''on''. | {{isda92prov|DUST}} attaches to a “default” (not defined) under ''any'' {{isda92prov|Specified Transaction}}, not '''''all''''' {{isda92prov|Specified Transaction}}s. But if you have a credit concern with a counterparty under a derivative-like master agreement — even on a failure to pay — you are hardly likely to be closing out some, but not other transactions. Especially not now in these days of compulsory regulatory [[variation margin]]. You’ll be closing out the lot. Yet, with different rules depending on whether its a failure to pay (before or at maturity), failure to deliver or repudiation, we think {{icds}} has made it all a bit fiddly. They may be strictly correct, but come ''on''. | ||
Note that in the {{2002ma}} there is specific accommodation for the “[[mini close-out]]” concept you see nowadays in securities financing | Note that in the {{2002ma}} there is specific accommodation for the “[[mini close-out]]” concept you see nowadays in [[securities financing]] transactions, which is a self-help remedy to deal with non-credit related settlement failures. That notion wasn’t around in 1992, so wasn’t addressed in this version. Look, {{icds}} are ''good'', but they’re not ''clairvoyant''. | ||
So you will see | So you will see countertparties, especially in the US, where the {{1992ma}} is still popular, wordsmithing the ambit of the DUST provision. If you can’t persuade them to step into the 21st century (I mean it’s only twenty years old, so let’s not rush into things, right?) and upograde to the {{2002ma}} then, while we have some sympathy with the point, pedantic though it may be, really we feel that the [[DUST]] formulation could be simplified for transactions under ''any'' [[master agreement]] — even for [[repudiation]] — by requiring the {{isda92prov|Non-Defaulting Party}} to have closed out the whole arrangement, not just the {{isda92prov|Specified Transaction}} itself. An amendment to the following effect, rendered in ISDA’s leaden prose, wouldn’t be out of the question: | ||
:“For the purposes of Section {{isda92prov|5(a)(v)}} where any {{isda92prov|Specified Transaction}} is governed by a [[master agreement]], an event will only be a {{isda92prov|Default Under Specified Transaction}} where it results in an early termination of all transactions outstanding under the documentation applicable to that {{isda92prov|Specified Transaction}}.” | :“For the purposes of Section {{isda92prov|5(a)(v)}} where any {{isda92prov|Specified Transaction}} is governed by a [[master agreement]], an event will only be a {{isda92prov|Default Under Specified Transaction}} where it results in an early termination of all transactions outstanding under the documentation applicable to that {{isda92prov|Specified Transaction}}.” | ||