Isda Master Agreement 2002 Sample
The International Swaps and Derivatives Association published a new framework agreement in December to replace the 1992 agreement. The new agreement is the work of ISDA`s documentation committee, with more than 100 different members reviewing past drafts and making comments. The trade association has already issued compensation notices on the new agreement in 36 different jurisdictions. The authors of the 2002 framework agreement have completely reviewed and redesigned the calculation of early termination payments, i.e. damages. The first and second methods, as well as the “market ratios and loss”, have been abolished and replaced by the so-called “close-out” amount. These changes should lead to greater speed, efficiency and (hopefully) objectivity in the calculation of advance termination payments. Although the architecture of the 1992 agreement has been maintained, each substantive provision has been literally rewritten to reflect all the different additions, revisions and clarifications. The 2002 document also restocked from 18 to 27 pages with detailed provisions at a simple distance. Some changes are revolutionary, such as z.B. the complete revision of the calculation of early end-of-life payments.
Other changes reflect the codification of market practices, such as. B the inclusion of a contractual set-off clause in the text of the 2002 Agreement itself. Finally, many changes have been made to clarify and simplify the agreement, such as for example. B changes to the non-payment provision. This discussion focuses mainly on changes that could be of major concern to a party that unites the new document. The new agreement significantly expands what constitutes a specified transaction. New forms of transactions added to the definition include credit derivatives, redemption agreements, purchase/resale transactions, securities lending transactions, weather derivatives, and securities and futures transactions in commodities. This expansion takes over many of the capital market business transactions, such as Repos, that have had no impact on the deal before.
The parties have refused in the past to add such transactions. The parties were concerned that an accidental or technical delivery failure in any of these transactions could trigger a default event under the 1992 Agreement. In particular, rest was vulnerable to this type of breakdowns and delivery failures. The 2002 agreement helps to improve this outcome by requiring “the acceleration or early termination of all transactions that have not been carried out in accordance with the documents in force for that specified transaction.” In other words, for a default to occur under the 2002 agreement, the documentation governing the specified transaction in question would have to be terminated prematurely. The 2002 agreement significantly expanded the Credit Event Upon Merger Termination Event Event. For a credit event to occur during the merger, the party involved must be “much weaker” after one in three designated events occurs. Once again, the authors chose not to define what is meant by “materially weaker.” It would probably be interpreted as meaning that if the party concerned had been “much weaker” before the conclusion of the framework agreement, the non-concerned party would not have concluded the agreement. .