2.1.4.80 Part 5 Other clauses - without commentary

Following are the Recommended and Optional clauses set out in 2.1.4.60 "Part 5 - other clauses with commentary - recommended" and 2.1.4.70 "Part 5 - other clauses - with commentary - optional" without commentary. As applicable they can be cut from here and pasted into Part 5 of a Schedule. 

(1) Application and ISDA Definitions

(a) Application. Every transaction between the parties which is, or is described in its confirmation as being, of the type specified in the table below is a Transaction governed by the terms of this Agreement (and not any other master agreement) and forms part of this Agreement unless the parties expressly agree in writing that this clause is not to apply. This applies whether or not the parties refer to this Agreement or state that the transaction is governed by the terms of any other master agreement when entering into the transaction.

(b) ISDA Definitions. The definitions and provisions contained in the respective ISDA Definitions specified below are incorporated into each Confirmation of a Transaction between the parties which is, or is described in its Confirmation as being, of the type specified below. If there is an inconsistency between those definitions and provisions and any such Confirmation, the Confirmation prevails.

Types of transactions ISDA Definitions
Currency option transaction or FX transaction 1998 FX and Currency Option Definitions, including Annex A, as published by International Swaps and Derivatives Association, Inc., the Emerging Markets Traders Association and the Foreign Exchange Committee
Forward rate agreement 2006 ISDA Definitions as published by International Swaps and Derivatives Association Inc.
Forward commodity transaction; spot commodity transaction; bullion spot transaction; bullion forward transaction 2005 ISDA Commodity Definitions, including the Annex, as published by International Swaps and Derivatives Association, Inc.

 

(2) [Care! This clause is required only if the parties agree to use the 2000 Definitions instead of the 2006 Definitions]

FRA Basis. Unless expressly agreed otherwise in respect of a particular Transaction, the following provisions apply to any Transaction which is, or is described in its Confirmation to be, an AUD or NZD forward rate agreement ("FRA"), or an AUD or NZD rate cap transaction, rate collar transaction or rate floor transaction.

For the purpose of the following provisions, the rate cap part of a rate collar transaction is to be treated as a rate cap transaction and the rate floor part of a rate collar transaction is to be treated as a rate floor transaction.

Despite sections 6 and 8.4 (b) of the 2000 ISDA Definitions, on each Payment Date:

(a) in the case of an FRA:

(i) if the Floating Rate exceeds the Fixed Rate, then the Floating Rate Payer must pay the absolute value of the FRA Amount to the Fixed Rate Payer; and

(ii) if the Fixed Rate exceeds the Floating Rate, then the Fixed Rate Payer must pay the FRA Amount to the Floating Rate Payer;

(b) in the case of a rate cap transaction, if the Floating Rate exceeds the cap rate, then the Floating Rate Payer (Seller) must pay the absolute value of the FRA Amount to the Fixed Rate Payer (Buyer). (No corresponding payment is due from the Fixed Rate Payer to the Floating Rate Payer);

(c) in the case of a rate floor transaction, if the floor rate exceeds the Floating Rate, then the Floating Rate Payer (Seller) must pay the FRA Amount to the Fixed Rate Payer (Buyer). (No corresponding payment is due from the Fixed Rate Payer to the Floating Rate Payer).

The "FRA Amount" is calculated in accordance with the following formula:

FRA-Amount.gif

where:

CA = Calculation Amount.

R1 = in the case of an FRA, the Floating Rate on the Payment Date (expressed as a number and not a percentage, eg 8.1875 not 8.1875%), or in the case of a rate cap transaction or a rate floor transaction, the Floating Rate calculated disregarding section 6.2 (a)(i) and section 6.2 (a)(ii) of the 2000 ISDA Definitions.

R2 = in the case of an FRA, the Fixed Rate (expressed as a number and not a percentage), or in the case of a rate cap transaction or a rate floor transaction, the cap rate or the floor rate respectively.

ND = the actual number of days in the Calculation Period.

Unless otherwise agreed, the Relevant Rate:

(a) in the case of A$ FRAs is "AUD-BBR-BBSW"; and

(b) in the case of NZD FRAs is "NZD-BBR-FRA".

Each reference in this clause to the "Floating Rate" is a reference to the Floating Rate plus or minus the Spread (if any).

(3) Spot Rate. The time for determining a Spot Rate for the purpose of Section 1.16 (e) of the 1998 FX and Currency Option Definitions published by International Swaps and Derivatives Association Inc is to be determined, for a European option, as at the Expiration Time, and for an American option or a Bermuda option, as at the time when the Notice of Exercise is given.

(4) Investment Manager Supplement. The Investment Manager Supplement in the form attached to this Agreement is deemed to be incorporated in this Agreement.

(5) ISDA Protocol. The parties agree that the terms of each Annex to the 2002 Master Agreement Protocol published by the International Swaps and Derivatives Association, Inc. ("Protocol") apply to this Agreement as if the parties had adhered to the Protocol without amendment.

(6) Early Termination Provision - Parties share bid/offer spread. 

#Add a new Section [15] as follows:

"[15] EARLY TERMINATION PROVISION

(a) Each party may terminate any Transaction before its stated maturity on a Break Date (being any date specified as such in the relevant Confirmation) by giving a notice (other than by facsimile transmission or electronic messaging system) to the other party not less than twenty (20) Local Business Days before a Break Date. The notice must specify:

(i) the Transaction to be terminated; and

(ii) the Break Date; and

(iii) the date and time when quotes under the fifth paragraph of the definition of Close-out Amount are to be sought.

(b) If a notice is given under paragraph (a):

(i) the Break Date specified in the notice will be deemed to be the Early Termination Date of the Transaction; and

(ii) the obligations of the parties to make any further payments under Section 2(a)(i) on or after the Break Date in respect of the relevant Transaction will terminate and the Transaction will be deemed to be a Terminated Transaction; and

(iii) each party must determine a Close-out Amount on the date and at the time specified under paragraph (a)(iii).

(c) The amount payable under Section 6(e) in respect of the Terminated Transaction is to be determined on the basis that there are two Affected Parties.

(d) Despite Section 6(d)(ii), payment under Section 6(e) must be made on the Break Date specified in the notice.

(e) In determining the Close-out Amount, each party must:

(i) assume that both parties are of the highest credit status (whether or not they have such status); and

(ii) if requested by the other party, indicate the rate or rates on which their Close-out Amounts are based.

(f) Nothing in this early termination provision prohibits a party from specifying an Early Termination Date under Section 6(a) or 6(b)(iv) in respect of the relevant Transaction after the notice is given under paragraph (a). If an Early Termination Date so specified occurs on or before the date that the payment, calculated in accordance with this early termination provision, is due under Section 6(e) in respect of the relevant Transaction, then the notice under paragraph (a) has no force or effect.  Otherwise, the notice under paragraph (a) prevails and any specification of an Early Termination Date under Section 6(a) or 6(b)(iv) has no force or effect."

(7) Early Termination Provision - Terminating party bears bid/offer spread. 

# Add a new Section [15] as follows:

"[15] EARLY TERMINATION PROVISION

(a) Each party may terminate any Transaction before its stated maturity on a Break Date (being any date specified as such in the relevant Confirmation) by giving a notice (other than by facsimile transmission or electronic messaging system) to the other party not less than twenty (20) Business Days before a Break Date. The notice must specify:

(i) the Transaction to be terminated; and

(ii) the Break Date.

(b) If a notice is given under paragraph (a):

(i) the Break Date specified in the notice will be deemed to be the Early Termination Date of the Transaction; and

(ii) the obligations of the parties to make any further payments under Section 2(a)(i) on or after the Break Date in respect of the relevant Transaction will terminate and the Transaction will be deemed to be a Terminated Transaction; and

(iii) the terminating party is to determine the Close-out Amount except that, in doing so, each reference to "Determining Party" (other than the first reference) in the first paragraph of the definition of "Close-out Amount" is to be taken to be a reference to the non-Determining Party.

(c) The amount payable under Section 6(e) in respect of the Terminated Transaction is to be determined on the basis that there is one Affected Party with the non-terminating party as the Affected Party.

(d) Despite Section 6(d)(ii), payment under Section 6(e) must be made on the Break Date specified in the notice.

(e) In determining the Close-out Amount, the terminating party must:

(i) assume that both parties are of the highest credit status (whether or not they have such status); and

(ii) if requested by the other party, indicate the rate or rates on which their Close-out Amounts are based.

(f) Nothing in this early termination provision prohibits a party from specifying an Early Termination Date under Section 6(a) or 6(b)(iv) in respect of the relevant Transaction after the notice is given under paragraph (a). If an Early Termination Date so specified occurs on or before the date that the payment, calculated in accordance with this early termination provision, is due under Section 6(e) in respect of the relevant Transaction, then the notice under paragraph (a) has no force or effect.  Otherwise, the notice under paragraph (a) prevails and any specification of an Early Termination Date under Section 6(a) or 6(b)(iv) has no force or effect."

(8) Payment deferral.

# Add a new Section [15] as follows:

"[15] Payment deferral

(a) If it is not possible for simultaneous payments to be made on a payment date, because of the time difference between the places in which payments are to be made, either party ("electing party") may elect to make its payment in escrow.

(b) The electing party must:

(i) notify the other party that the payment will be made in escrow; and

(ii) deposit the due payment ("deposited payment") with an escrow agent selected by the electing party on the payment date by 2.00  pm local time in the place where the payment is due; and

(iii) give an irrevocable payment instruction to the escrow agent:

(A) to release the deposited payment to the other party when the escrow agent receives payment from the other party ("corresponding payment"); or

(B) if the corresponding payment is not made on the payment date, to return the deposited payment to the electing party.

(c) If a party receives a notice under paragraph (b), it must deposit the corresponding payment with the escrow agent on the payment date. The corresponding payment must be accompanied by an irrevocable payment instruction to immediately pay the corresponding payment to the electing party if the escrow agent is still holding the deposited payment.

(d) The electing party must pay the costs of the escrow arrangements.

(e) Subject to paragraph (f), if the deposited payment is not released by 5.00 pm local time (in the place where the deposited payment is due) on the payment date, the intended recipient of the deposited payment is entitled to interest on the deposited payment at the rate offered by the escrow agent for overnight deposits in the relevant currency in the office where it holds the deposited payment (applicable at 11.00 am local time on that day) for the period of the deposit.

(f) The intended recipient is not entitled to the interest referred to in paragraph (e) if the deposited payment is not released because the intended recipient failed to make the required corresponding payment to the escrow agent on the payment date."

(9) Notices by facsimile.

Replace Section 12(a)(iii) with:

"(iii) if sent by facsimile transmission, on the date a transmission report is produced by the machine from which the facsimile was sent which indicates that the facsimile was sent in its entirety to the facsimile number of the recipient notified for the purpose of this Section unless the recipient notifies the sender within one Local Business Day of the facsimile being sent that the facsimile was not received in its entirety in legible form;"

(10) Non ISDA transactions subject to ISDA.

# Add a new Section [15] as follows:

"[15] Existing transactions and transactions not expressed to be subject to ISDA Master Agreement

The parties agree that every transaction between them is a Transaction governed by this Agreement unless the terms of this Agreement have been expressly excluded.

This applies whether or not the parties:

(a) refer to this Agreement; or

(b) state that a transaction is governed by the terms of any other master agreement

when entering into or confirming the transaction.

For the purpose of this clause, "transaction" means a transaction between the parties, whether entered into before, on or after the commencement of this Agreement, in the nature of [insert range of transactions such as Swap Transaction as defined in 2006 ISDA Definitions etc]."

(11) Transfer of Affected Transactions.

The following sentence is added at the end of the last paragraph of Section 6(b)(ii):

"However, consent may be withheld if the other party considers that its credit exposure to the transferor would be adversely affected by the transfer."

(12) Linking multiple master agreements for netting purposes.

The parties agree that each of the following master agreements between them is a "Linked Master Agreement" for the purpose of this Master Agreement:

  • [date] [description eg. other ISDA Master Agreement]
  • [date] [description eg. IFEMA]

    [etc.]

The parties further agree that:

(a) for the purpose of Section 6 of this Master Agreement, the rights and obligations under a particular Linked Master Agreement constitute a Transaction governed by this Master Agreement and, if an Early Termination Date occurs in respect of all Transactions, a Terminated Transaction;

(b) if an "Event of Default" as defined in this Master Agreement occurs and the Non-defaulting Party gives a notice designating an Early Termination Date under Section 6(a) of this Master Agreement, then:

(i) the event also constitutes an "Event of Default" under the Linked Master Agreement (in addition to any other event that constitutes an Event of Default under the Linked Master Agreement); and

(ii) the non-defaulting party under the Linked Master Agreement (however that party is described) in relation to that Event of Default is to be the same as the Non-defaulting Party under this Master Agreement;

(c) if an "Event of Default" as defined in the Linked Master Agreement occurs:

(i) that event constitutes an Event of Default under this Master Agreement;

(ii) the giving of the notice that results in that Event of Default occurring under the Linked Master Agreement constitutes the giving of a notice designating an Early Termination Notice under Section 6(a) of this Master Agreement; and

(iii) the Non-defaulting Party under this Master Agreement in relation to that Event of Default is to be the same as the non-defaulting party (however that party is described) under the Linked Master Agreement;

(d) if an event described in sub-paragraph (b) or (c) occurs, then for the purpose of calculating the amount payable in respect of the Early Termination Date under Section 6(e)(i) of this Master Agreement, the Close-out Amount for each Transaction referred to in sub-paragraph (a) is to be the amount calculated in accordance with:

(i) for the Linked Master Agreement [describe the Agreement], Section [insert reference to close out calculation provision in that Linked Master Agreement] of that agreement;

(ii) [repeat for each Linked Master Agreement],

and whether the Close-out Amount is expressed as a positive or negative number is to be determined as described in the definition of "Close-Out Amount" in this Master Agreement;

(e) the Close-out Amount for all Transactions other than those referred to in sub-paragraph (d) is to be calculated in accordance with Section 6 of this Master Agreement; and

(f) the obligation of a party to pay an amount referred to in sub-paragraph (d) under the Linked Master Agreement and under this Master Agreement is terminated on the inclusion of the amount in the calculation of the net amount payable between the parties under Section 6(e) of this Master Agreement.[1]

(13) Definition of "Close Out Amount". A Close-out Amount is not required to be the market value of the Terminated Transaction or group of Terminated Transactions and, subject to Section 6(e)(ii)(3), the Determining Party is not obliged to use mid-market quotations or mid-market valuations in determining a Close-out Amount.

(14) Amended Condition Precedent or Additional Termination Event

"(#) The condition precedent in Section 2(a)(iii)(1) does not apply to a payment or delivery owing by a party if the other party has satisfied in full all its payment and delivery obligations under Section 2(a)(i) and Section 9(h) and has no future payment or delivery obligations, whether absolute or contingent, under Section 2(a)(i) or Section 9(h)."

OR

"(g) Additional Termination Event will apply. The following will constitute an Additional Termination Event:

An Event of Default occurs with respect to a party ("Party X"), Party X has satisfied all its payment and delivery obligations under Section 2(a)(i) and Section 9(h) with respect to all Transactions and has no future payment or delivery obligations to the other party ("Party Y") whether absolute or contingent under Section 2(a)(i) or Section 9(h).

 

[1] Ensure that you also include the clause in the Linked Master Agreement that the parties agree that:

(a) this agreement constitutes a "Linked Master Agreement" for the purpose of the ISDA Master Agreement entered into between the parties on [or about the date of this agreement] ("ISDA Master Agreement"); and

(b) this agreement is to be read subject to Part 5([insert cross reference to additional clause in ISDA Master Agreement]) of the Schedule to the ISDA Master Agreement.


Last Update Date 29 Jun 2011