Template:M intro isda qualities of a good ISDA: Difference between revisions

Template:M intro isda qualities of a good ISDA (view source)

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-These qualities interact and depend on each other: agreements which are fair will need to be clear, those that are clear will inspire confidence in your own staff, which will tend them away from the [[Casanova principle]] towards fairness; an agreement that is clear and fair lends itself to consistency, since there will be less cause to negotiate and one that is fair, clear and consistent is easy to maintain and, heaven forfend, enforce.
+In which JC ventures forth, uninvited, onto the topic of what makes a good ISDA. The same things, we rather think that make any good commercial contract, but ISDA is what we know so we should go with that.
+The pre-printed master agreement is what it is — it was drafted, so conventional wisdom has it, to ''avoid'' controversy — so when we talk about the “qualities of a good ISDA” we mean of course its {{isdaprov|Schedule}}. That is where all the skirmishes are.
+A scan of the subheads will reveal five basic qualities:  fairness, clarity, consistency, simplicity and aptness to instil ''confidence''.
+These qualities interact and depend on each other.
+''Fair'' agreements must be ''clear'' for customers to realise they are fair. ''Clear'' agreements will inspire ''confidence'', in your own staff, thus distracting them from the [[Casanova principle]] and toward ''fairness''. ''Clarity'' and ''fairness'' lends itself to ''consistency'', since your customers will find less cause to negotiate.''Clarity'',''fairness'', ''confidence'' and ''consistency'' make for ''simplicity'' a simple record that is easy to maintain, roll out and, heaven forfend, enforce.
 ===Fair===
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 JC is by lifelong experience a [[sell-side]] guy: he comes at this from the perspective of a merchant contracting with its customers. Hip types call these “B2C” deals, but the JC is not a hip type. Merchant and customer are, generally, on the same side: their interests conflict but gently, and not viciously: the merchant wants a [[commission]]  or a markup, the customer wants the product cheap, but beyond that we each wish earnestly for each other’s continued prosperity. Things can get chewy at the extremes, but most customers never get near a [[tail event|chewy extreme]].
-Now we sell-siders may occasionally engage with ostensible ''hostiles'' — competitors for example — but when they do, they abide by an unspoken pact of [[good faith]] for the limited ends which have brought the warring sides together. They must, at some level, trust one other or at least have a common interest, or they would not contract at all.<ref>David Graeber makes a fascinating point when discussing the ''non''-origin of currency out of barter: a barter is an arm’s length trade of equivalent good conducted between parties who are dispositionally ''rivals'' and not partners. Once the exchange happens, nothing is left on the table; there is no presumption of enduring goodwill, no expectation of further business, or any kind of obligation undischarged. A barter is an exchange conducted with untrusted aliens. Inside your community, where there is trust, we are less compelled to extract our precise pound of flesh: there is a give and take; we let obligations lie undischarged and they acquire a moral quality. These are the ties that bind — the imperative becomes to ''avoid'' fully discharging our dues to each other. This is the relationship we should aspire to with our customers. We trust them to pay later — we extend ''credit''. (Hence money emerged not from fair value barter with strangers but as a way of evidencing indebtedness amongst those who knew each other. You don't extend credit to aliens.</ref>
+Now we sell-siders may occasionally engage with ostensible ''hostiles'' — competitors for example — but when they do, they abide by an unspoken pact of [[good faith]] for the limited ends which have brought the warring sides together. They must, at some level, trust one other or at least have a common interest, or they would not contract at all.<ref>[[David Graeber]] makes a fascinating point when discussing the ''non''-origin of currency out from [[barter]]: [[barter]] is an arm’s length trade of equivalent goods conducted between parties who are dispositionally ''rivals'' and not partners. Once the exchange happens, nothing is left on the table; there is no presumption of enduring goodwill, no expectation of further business, or any kind of obligation undischarged. A barter is an exchange conducted with untrusted aliens. Inside your community, where there is trust, we are less compelled to extract our precise pound of flesh: there is a give and take; we let obligations lie undischarged and they acquire a moral quality. These are the ties that bind — the imperative becomes to ''avoid'' fully discharging our dues to each other. This is the relationship we should aspire to with our customers. We trust them to pay later — we extend ''credit''. (Hence money emerged not from fair value barter with strangers but as a way of evidencing indebtedness amongst those who knew each other. You don't extend credit to aliens.</ref>
 A presumption of any negotiation is [[good faith]]. ''Some'' level of trust. We don’t negotiate with terrorists.