Template:M summ 2018 CSD 6

Generally the Control Agreement will defer back to the controlling CSA to determine whether an event has occurred to entitle the Secured Party to exercise a Notice of Exclusive Control.

The point of this whole arrangement being to provide credit mitigation in the unusual event that the party to a derivative contract immolates unexpectedly. This collateral is not there to be optimised, reused, financed (as variation margin might be), since that would convert a credit mitigant in one direction to a credit liability in the other direction. The moment i reuse collateral you have given me, i have an unsecured debt claim to return it to you, for which you are my creditor. That is not the idea.

Once the game is absolutely up, the ISDA Master Agreement is closed out, the Early Termination Amount determined and the parties’ net liabilities to each other crystallised, then — assuming you are actually owed something by the bankrupt Counterparty — you can appropriate your Secured Property. Until then, hands off.