ISDA master agreements and schedules—key provisions

The following Banking & Finance practice note provides comprehensive and up to date legal information covering:

  • ISDA master agreements and schedules—key provisions
  • The key concepts underpinning the ISDA master agreement
  • Single agreement
  • Flawed asset
  • Close-out netting
  • Key provisions in the ISDA master agreements
  • Representations
  • Events of default
  • Termination events
  • Payment netting
  • More...

ISDA master agreements and schedules—key provisions

This Practice Note summarises the key provisions which are applicable to both the 1992 ISDA Master Agreement (Multicurrency—Cross Border) (the 1992 Agreement) and the 2002 ISDA Master Agreement (the 2002 Agreement) and their related schedules. References in this practice note to the master agreements (the ISDA master agreement) are references to both the 1992 Agreement and the 2002 Agreement, unless otherwise stated.

For information on the differences between the 1992 Master Agreement and the 2002 Master Agreement, see Practice Note: ISDA documentation—comparison of the 1992 and 2002 master agreements and for more information on the ISDA documentation framework, see Practice Note: Derivatives—ISDA documentation framework.

The key concepts underpinning the ISDA master agreement

The ISDA master agreement is based upon three key concepts which will be described in more detail in the following paragraphs:

  1. single agreement

  2. flawed asset, and

  3. close-out netting

Single agreement

Under the ISDA approach to documentation, all of the derivative transactions entered into between any two parties are documented under one single agreement (albeit in several layers of documentation), as set out in Section 1(c) of the ISDA master agreement. This becomes important when there are multiple trades between the same parties.

On insolvency, the single agreement approach prevents the liquidator from treating each trade between the parties as a separate contract. The liquidator is unable to affirm the most favourable trades and

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