Terminating derivatives entered into under an ISDA Master Agreement
Terminating derivatives entered into under an ISDA Master Agreement

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

  • Terminating derivatives entered into under an ISDA Master Agreement
  • Terminating derivatives
  • Termination events
  • Events of default
  • Deferred payments under Section 2(a)(iii)
  • Automatic early termination
  • Termination notices
  • Calculation statement
  • Interest payments on Early Termination Amounts
  • 1992 ISDA Master Agreement
  • More...

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.

Terminating derivatives

If an ISDA contract is going to be terminated, it is important to ensure that the terms of the ISDA Master Agreement that relate to termination are followed to the letter. Any error can lead to the termination not having been effected properly and being invalid.

Section 6 (Early Termination) of the ISDA Master Agreement sets out the consequences of an occurrence of an Event of Default or Termination Event as described in Section 5 (Events of Default and Termination Events) 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: Scope of the ISDA

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