Undead ISDA

ISDA Anatomy™ incorporating our exclusive ISDA in a Nutshell™ Go Premium Uh-oh: honey — did I check the residual Cross Default risk on that old 87 ISDA? Index: Click ᐅ to expand: ISDA Navigation The Varieties of ISDA Experience Subject 2002 (wikitext) 1992 (wikitext) 1987 (wikitext) Preamble Pre Pre Pre Interpretation 1 1 1 Obligns/Payment 2 2 2 Representations 3 3 3 Agreements 4 4 4 EODs & Term Events 5 Events of Default FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events Illegality • Tax Event • TEUM • CEUM • ATE • 5 Events of Default FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events Illegality • Tax Event • TEUM • CEUM • ATE • 5 Events of Default FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events Illegality • FM • Tax Event • TEUM • CEUM • ATE • Early Termination 6 Early Termination ET right on EOD • ET right on TE • Effect of Designation • Calculations 6 Early Termination ET right on EOD • ET right on TE • Effect of Designation • Calculations • Set-off 6 Early Termination ET right on EOD • ET right on TE • Effect of Designation • Calculations • Set-off Transfer 7 7 7 Contractual Currency 8 8 8 Miscellaneous 9 9 9 Offices; Multibranch Parties 10 10 10 Expenses 11 11 11 Notices 12 12 12 Governing Law 13 13 13 Definitions 14 14 14 Schedule Schedule Schedule Schedule Termination Provisions Part 1 Part 1 Part 1 Tax Representations Part 2 Part 2 Part 2 Documents for Delivery Part 3 Part 3 Part 3 Miscellaneous Part 4 Part 4 Part 4 Other Provisions Part 5 Part 5 Part 5 Comments? Questions? Suggestions? Requests? Insults? We’d love to 📧 hear from you. Sign up for our newsletter.

The status of every defunct ISDA master agreement, once all transactions have terminated, whether through the exigencies of a stressed close-out, or simply through the entropy and general lassitude of a modern life in which many erstwhile ISDA devotees grew bored, or adversely regulated, and gave up on swaps, letting the last remaining transactions to roll off and scamper, free, into the fragrant meadows of oblivion.

For while you can terminate a Transaction under an ISDA Master Agreement — and all of them at once, if things really come to that — none of its printed forms envisages the parties terminating the master agreement itself. It has no general no-fault termination provisions so, unless you and your counterparty can confect one — for that you will need communion wine, garlic, wooden stakes and so on — a discarded ISDA arrangement will just lie there, locked-in, mute, transfixed, plastered to the infinite like some ghostly apparition, frozen at the event horizon of financial probity for ever — surviving, indefinitely, some say even beyond the mortal existence of they whose trading relationship it once described.

This unnerves those of delicate or superstitious mien. For if it is still there, however immobile, can it not cause mass destruction through inattention?

Some would say this is a non-point, as un-alive as the ISDA that presents it. For an ISDA, under which there are no extant Transactions, carries no financial obligations. It presents no risk. It is as safe as a rusty Luger with the firing pin removed.

If no Transactions remain that one can close out, what earthly concern is it, for either party, if notional non-payment obligations go unfulfilled? What kind of paranoid weirdo would take the point that one’s continuing covenants — to send annual reports within three months of their publication, for good example — are being broken? And what of those financial meta-obligations? That two-edged Cross Default clause? Could it ... ?

You may laugh, but note only this: they who so haughtily wave such trifles away yet still go quiet and dare not speak of the Dark Lord of the Swaps.

See also

• Early Termination under the ISDA Master Agreement
• No-fault termination
• The Good Man
• The Dark Lord of the Swaps