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Enron Mail |
Joe has asked that I forward this to the full group, as he was unable to
receive the original email with addressees. From: Joseph Carrico [Joseph.Carrico@ib.bankgesellschaft.de] To: Schuyler Henderson Re: Response to your remarks of 7 September. Dear Schuyler, I would like respond to your mail concerning the ISDA Protocol. Concerning Annex 3:- I concur with your observations that in many lending and repo master agreements there are events of default that are of another nature than the events which are Events of Default under the ISDA. These events include, for example, being suspended from an exchange (which may be relevant as an event of default with respect to securities in a specific market, but was very likely not foreseen by the parties to the ISDA as an Event of Default under the broader product coverage of the ISDA). In addition, in the proposed ?5(a)(v)(2) there is a similar cross pollution issue with respect to delivery failures. When reviewing the many master agreements where under physical delivery of shares or bonds are foreseen there is little consistency with respect to the treatment of delivery failures. ISDA documented products have the possibility to be covered by Failure to Deliver provisions, some agreements provide for a mini-default/close-out, some try to bring in a cash element as a test for proving a counterparty's liquidity (often a termination event approach) , and others offer the option of a mini-close-out or a total default, and yet other documents offer only a total default. Given the regularity these failures occur in the market, I have drafted a version of Annex 3, which also addresses this issue by building into the provisions a procedure (a shortened version of the Failure to Deliver provision used in ISDA's 1997 Government Bond Option Definitions) whereby the counterparty is given the opportunity to prove its liquidity. I attach the annex I have prepared addressing these issues. Annex 8:- Concerning Early Termination Date and Section 6, you raise very interesting issues, which I confess I had not focused on before in that light. I agree with your analysis that with the effective date of the notice being the true termination date of the Transactions with the Early Termination Date being more a valuation date. My view is that this is an opportune time to discuss the issues you raise in more detail given the broad scope of the up coming Master Agreement Protocol. I attach the alternative proposal for Annex 3. Would you please forward this response to the broader documentation committee, as I am unable to do so from my computer because I did not receive the original e-mail due to the length of the header on the e-mail. Regards, Joseph Carrico _____________________________________________________________________ This message has been checked for all known viruses by the MessageLabs Virus Scanning Service. For further information visit http://www.messagelabs.com/stats.asp _____________________________________________________________________ CONFIDENTIALITY NOTICE The contents of this e-mail are confidential to the ordinary user of the e-mail address to which it was addressed and may also be privileged. If you are not the addressee of this e-mail you may not copy, forward, disclose or otherwise use it or any part of it in any form whatsoever. If you have received this e-mail in error please e-mail the sender by replying to this message. A list of the partners of Norton Rose, Solicitors, can be inspected at www.nortonrose.com ______________________________________________________________________ - BD-#398110-v1-ISDA_1992_Master_Agreements_-_Annex_3.DOC
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