Scope of the ISDA Master Agreement—Section 6 (Early Termination)
Scope of the ISDA Master Agreement—Section 6 (Early Termination)

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

  • Scope of the ISDA Master Agreement—Section 6 (Early Termination)
  • ISDA documents
  • Section 6—Early Termination
  • Right to Terminate Following an Event of Default
  • Right to Terminate Following Termination Event
  • Calculations after the declaration of an Early Termination Date
  • Calculations after the declaration of an Early Termination Date
  • Calculations in respect of Events of Default
  • Payments due on Early Termination under the 2002 ISDA Master Agreement
  • Payment Date
  • more

ISDA documents

The 1992 and 2002 ISDA Master Agreements (the Master Agreements) are standard form documents produced by the International Swaps and Derivatives Association, Inc (ISDA).

In this Practice Note, references to Sections of a Master Agreement and Parts of a Schedule are references to the 2002 ISDA Master Agreement and Schedule unless otherwise stated.

For general information about negotiating ISDA Master Agreements, see: Introduction to negotiating ISDA documents.

Section 6—Early Termination

Section 6 (Early Termination) of the Master Agreement sets out the consequences of an occurrence of an Event of Default or Termination Event as detailed in Section 5 (see Practice Note: Scope of the ISDA Master Agreement—Section 5 (Events of Default and Termination Events)).

Importantly, it sets out how the close out netting mechanism operates following an Event of Default or Termination Event.

Right to Terminate Following an Event of Default

Where a party has defaulted under Section 5(a) (Events of Default) of the Master Agreement, under Section 6(a) (Right to Terminate Following Event of Default) of the Master Agreement the Non-defaulting Party is entitled, within 20 days of receiving the termination notice, to designate a day which will be the Early Termination Date for all outstanding Transactions governed by that Master Agreement.

The election that Automatic Early Termination will apply in Part 1(e) of the