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Template:M gen 2002 ISDA 2(a): Difference between revisions
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Less patient types — like yours truly — might wish to read all of that into the still, small voice of calm of the word “deliver” in the first place. What else could it realistically mean, but to deliver outright, and free of competing claims? It is bound up with implications about ''what'' you are delivering, and ''whose'' the thing is that you are delivering. It would be absurd to suppose one could discharge a physical delivery obligation under a swap by “delivering” an item to which one had no title at all: it is surely implicit in the commercial rationale that one is transferring, outright, the value implicit in an asset and not just the formal husk of the asset itself, on terms that it may be whisked away at any moment. One is surrendering the implicit expense of the asset (in return for whatever your counterparty surrenders to you). As the bailiffs take leave of your counterparty with the asset you gave it strapped to their wagon, it would hardly do to say, “oh, well, I did deliver you that asset: it never said anywhere I had to have any proprietary interest in it, or that I was meant to be transferring any legal interest in it to you. It is all about my the act of delivery, I handed something to you, and that is that.” Delivery is more than performative. | Less patient types — like yours truly — might wish to read all of that into the still, small voice of calm of the word “deliver” in the first place. What else could it realistically mean, but to deliver outright, and free of competing claims? It is bound up with implications about ''what'' you are delivering, and ''whose'' the thing is that you are delivering. It would be absurd to suppose one could discharge a physical delivery obligation under a swap by “delivering” an item to which one had no title at all: it is surely implicit in the commercial rationale that one is transferring, outright, the value implicit in an asset and not just the formal husk of the asset itself, on terms that it may be whisked away at any moment. One is surrendering the implicit expense of the asset (in return for whatever your counterparty surrenders to you). As the bailiffs take leave of your counterparty with the asset you gave it strapped to their wagon, it would hardly do to say, “oh, well, I did deliver you that asset: it never said anywhere I had to have any proprietary interest in it, or that I was meant to be transferring any legal interest in it to you. It is all about my the act of delivery, I handed something to you, and that is that.” Delivery is more than performative. | ||
We think one could read that into the question of whether a delivery has been made at all. Should a third party assert title to or some claim over the asset, the innocent party’s best tactic is not to | We think one could read that into the question of whether a delivery has been made at all. Should a third party assert title to or some claim over the asset, the innocent party’s best tactic against its roguish counterparty is not a vain appeal to representations as to the terms of delivery, but to deny that delivery has taken place ''at all''. “I was meant to have the asset. This chap has repossessed it; therefore I do not have it. Therefore you have failed to deliver it.” | ||
In any weather, much of this is | In any weather, nowadays much of this is made moot by the realities of how financial assets are transferred: that is, electronically, [[Fungible|fungibly]], in [[Book-entry securities|book-entry systems]], and therefore, by definition, freely: a [[creditor]] takes security over accounts to which assets for the time being are credited, or by way of physical [[pledge]] where the [[surety]] resides in the pledgee holding and therefore controlling the securities for itself. It is presumed that, to come about, any transfer of assets naturally comes electronically and without strings attached. It would be difficult for such a security holder to mount a claim for an asset transferred electronically to a bona fide third party recipient for value and without notice: the practicalities of its security interest lie in its control over the asset in the first place: holding it, or at the least being entitled to stop a third party security trustee or escrow custodian delivering away the asset without the security holder’s [[prior consent]]. | ||