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Termination - DRV-F Provision: Difference between revisions
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Lots of fun things to see here. | |||
===Spartan close-out rights=== | |||
Firstly, by comparison with the {{isdama}}’s fecund battery of {{isdaprov|Events of Default}}, {{isdaprov|Termination Events}} and {{isdaprov|Additional Termination Events}} for [[closing out]] a delinquent counterparty, the {{drvf}} is positively Spartan: a failure to pay, or perform any part of the agreement, which requires notice to become an event of default, and [[insolvency]], which doesn’t. | |||
===Insolvency=== | |||
*'''Short and to the point''': Continuing its theme of uncharacteristic Teutonic brevity, the idea of {{csaprov|insolvency}} isn’t nearly as gruesomely articulated in the {{drvf}} as {{isdaprov|Bankruptcy}} is in the {{isdama}}. | |||
*'''{{drvfprov|Insolvency}} is automatic, but it isn’t an [[AET]]''': Insolvency terminates the agreement instantly at the moment of — but not an instant before — insolvency. Given that the Germanic [[netting opinion]] writers tend to plump for the {{isdama}}’s {{isdaprov|Automatic Early Termination}} — which contrives to terminate {{isdaprov|Transaction}} a micro-second ''before'' the insolvency commences, apparently to avoid theoretical weaknesses in a creditor’s position from the moment the insolvency happens — it is interesting that their own Banker’s trade association doesn’t feel exercised about the same issue in their domestic agreement. the agreement does terminate automatically, to be sure, but at, not before, the moment of insolvency. This gives innocent parties some risk, as almost certainly they will not know instantly that their transactions are over. They are theoretically unhedged for the period from the insolvency until they do. | |||