There are two versions of the ISDA agreement. One is the 2002 isda management contract and the other is the 1992 isda management contract. These two versions are divided into 14 sections that define the contractual relationship between the parties. It contains standard terms that detail what happens when a default case, when one of the parties occurs. While banks prefer the shorter grace period of a local business day or a local delivery day in the event of default or delivery of the default and the additional 15-day schedule in two default bankruptcies, they are not popular with small counterparties in companies, emerging countries and hedge funds. Banks have often shortened the delivery times for hedge funds under the 1992 isda Master Agreement Schedules, so hedge funds should have less reason to oppose it. The following conditions must be included in an isda agreement (international agreement on exchange contracts and derivatives): demand for the 2002 agreement is low. The major banks have generally prepared their timetables for 2002, but only commit to the counterparty`s request. The institutions that vigorously promoted the 1992-93/94 agreement and had to wait many months to complete it are reacting more reactively. Many are waiting for the major banks to obtain the authorizations of the political committee for the implementation of the 2002 agreement before sending them their calendars for 2002 or reviewing their own.
Market participants are used to the payment mechanisms of the market mark and loss in the 1992 agreement. They are less certain of the amount of the close-out and, in particular, of the possible use of internal assessments and data, despite the commitment of the determining party to act consistently and in good faith by applying economically viable procedures to achieve an economically reasonable outcome. As a result, the March 2003 ISDA amendment agreement, which facilitated the introduction of the close-out amount in the 1992 agreement, was not widely used by the banks interviewed recently. This time, ISDA indicated that there was no obligation to amend the 2002 agreement. The market is familiar with the 1992 agreement and, in this case, familiarity is more a source of consolation than contempt. Paul Hardingi Managing Director of Derivate Documentation Limited, a consulting firm that provides trading, training and recruitment services in derivatives documentation. He is also the author of the Mastering the ISDA Master Agreement (1992 and 2002) – There is a general “wait” or “after you” attitude on the market. I think that more big banks need to introduce the 2002 agreement more vigorously if it is to be caught up. There is a tendency to withdraw from the 1992 agreement at the slightest objection from the counterparty, and an ISDA master contract is the most commonly used master contract for international counterparties.