The latest instalment of the JC on ISDA, with our own 2001-Airplane-Monty Python portmanteau. In a break from usual practice, rather than copying the article into substack I am going to link to the original article on the JC (it’s too long to fit on an email):
Automatic Early Termination: Free version (really long!)
Automatic Early Termination: Premium version (even longer!)
Remember you can access the equivalent articles tailored for the three different editions of the ISDA Master Agreement (and toggle between premium and economy) from the panel:
For those who are not deep in the ninja here is some pre-reading:
Bankruptcy phase transition: The difference between insolvency and bankruptcy and why the phase transition between them is a weird dreamtime that freaks derivatives lawyers out.
Bankruptcy shenanigans and why they present a unique problem for derivatives counterparties that normal creditors are less bothered about.
Single Agreement: The unbearable weirdness of ISDA’s single agreement concept.
Regulatory capital: The rules on how much capital a regulated financial institution is required to hold, and how that is calculated.
Closing out an ISDA: The law and lore of closing out an ISDA
Flawed asset: ISDA’s notorious “flawed asset” provision: Section 2(a)(iii).
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