Use of the Annex with ISDA Master Agreement and Schedule—the obligation to post Collateral

By comparison to the English law Credit Support Annex (CSA) to the ISDA Master Agreement, the New York law CSA makes provision for Liabilities to be secured by way of a pledge, rather than a transfer of title. As such, the first point to note in using a New York law CSA is that a party providing collateral to another for liabilities under the ISDA Master Agreement is providing a security interest only, and not transferring legal title. This parallels the way the English law Credit Support Deed operates. A CSA subject to New York law needs to be used with an ISDA Master Agreement and Schedule similarly subject to New York law in order to be properly effective.

Since derivative contracts take their value from underlying financial instruments or references which may themselves be subject to price fluctuations, the parties may at different times in their trading relationship change status as debtor and creditor, which can give rise in turn