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Template:M gen 2002 ISDA 5(a)(v): Difference between revisions
Template:M gen 2002 ISDA 5(a)(v) (view source)
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{{isdaprov|DUST}} attaches to a “default” (not defined) under ''any'' {{isdaprov|Specified Transaction}}, and (other than under Section {{isdaprov|5(a)(v)}}(3) for delivery failures) not ''''all''''' {{isdaprov|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''. | {{isdaprov|DUST}} attaches to a “default” (not defined) under ''any'' {{isdaprov|Specified Transaction}}, and (other than under Section {{isdaprov|5(a)(v)}}(3) for delivery failures) not ''''all''''' {{isdaprov|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''. | ||
So we have a lot of sympathy with the point, pedantic though it may be, that the [[DUST]] formulation could be simplified An amendment to the following effect, rendered in ISDA’s leaden prose, wouldn’t be out of the question: | So we have a lot of sympathy with the point, pedantic though it may be, that the [[DUST]] formulation could be simplified for transactions under any master agreement — even for repudiation — by requiring the {{isdaprov|Non-Defaulting Party}} to have closed out the whole arrangement, not just the {{isdaprov|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 {{isdaprov|5(a)(v)}} where any {{isdaprov|Specified Transaction}} is governed by a [[master agreement]], an event will only be a {{isdaprov|Default Under Specified Transaction}} where it results in an early termination of all transactions outstanding under the documentation applicable to that {{isdaprov|Specified Transaction}}.” | :“For the purposes of Section {{isdaprov|5(a)(v)}} where any {{isdaprov|Specified Transaction}} is governed by a [[master agreement]], an event will only be a {{isdaprov|Default Under Specified Transaction}} where it results in an early termination of all transactions outstanding under the documentation applicable to that {{isdaprov|Specified Transaction}}.” | ||
===Final payments=== | ===Final payments=== | ||
The reason for the second limb of the definition is to catch final payments, which can’t be accelerated, since they’re already due. | The reason for the second limb of the definition is to catch final payments, which can’t be [[accelerated]] as such, since they’re already due. | ||
{{DUST and Cross Default Comparison}} | {{DUST and Cross Default Comparison}} | ||