Notices to send when terminating derivative transactions early
Notices to send when terminating derivative transactions early

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

  • Notices to send when terminating derivative transactions early
  • How to terminate a derivative transaction
  • What needs to be included in the early termination notice
  • Notices generally
  • Potential event of default
  • Event of default
  • Termination event
  • What may happen if you do not comply with the notice requirements
  • The Calculation Statement
  • Corporate Insolvency and Governance Act 2020

Coronavirus (COVID-19): This Practice Note contains information on subjects potentially impacted by the government and regulators' responses to the coronavirus (COVID-19) outbreak. We are reviewing our content on the basis of information available and will keep it under regular review. For information on key developments and related practical guidance on the implications for lawyers, see: Coronavirus (COVID-19) toolkit and Practice Note: Coronavirus (COVID-19)—implications for derivatives transactions.

How to terminate a derivative transaction

Section 6 (Early Termination) of the ISDA Master Agreement sets out the consequences of the occurrence of an Event of Default or a Termination Event as described in Section 5 (Events of Default and Termination Event) of the ISDA Master Agreement. In short, the difference between an event of default and termination event is that in an event of default there is a party that can be blamed, whereas generally in a termination event, the event just happened or was outside a party's control.

Section 6 also sets out how the close-out netting mechanism operates following the occurrence of an Event of Default or Termination Event.

For more information, see Practice Notes: Terminating derivatives entered into under an ISDA Master Agreement, Scope of the ISDA Master Agreement part 4—Section 5 (Events of Default and Termination Events) and Scope of the ISDA Master Agreement part 5—Section 6 (Early Termination).

Note that event of defaults do not require notice

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