ISDA 2013 DF Agreement – Understanding the Key Features

The ISDA 2013 DF (Derivatives) Agreement is the latest version of the International Swaps and Derivatives Association (ISDA) Master Agreement, which is widely used in the derivatives market. This agreement sets out the standard terms and conditions for over-the-counter (OTC) derivatives transactions between two parties. In this article, we will explore the key features of the ISDA 2013 DF Agreement, which is an important document for anyone involved in the derivatives market.

Scope of the Agreement

The ISDA 2013 DF Agreement covers a broad range of OTC derivatives transactions, including interest rate swaps, credit default swaps, currency swaps, equity swaps, and commodity swaps. The agreement also provides for various types of collateral arrangements, such as posting initial margin and variation margin.

Key Features of the Agreement

1. Termination Events: The ISDA 2013 DF Agreement includes a comprehensive list of Termination Events, which trigger the early termination of the transaction. These events include bankruptcy, failure to pay, credit downgrade, and material breach of the agreement.

2. Calculation and Payment of Amounts Due: The agreement sets out the calculation and payment of amounts due under the transaction, including interest, fees, and other charges. It also provides for the netting of amounts due in the event of a default or termination.

3. Representations and Warranties: The parties to the agreement make certain representations and warranties regarding their legal capacity, power, and authority to enter into the transaction. They also represent that they have obtained all necessary consents and approvals required for the transaction.

4. Credit Support: The agreement provides for various types of credit support, which the parties can use to mitigate counterparty credit risk. These include posting collateral, obtaining guarantees, and setting credit limits.

5. Governing Law and Jurisdiction: The ISDA 2013 DF Agreement is governed by the laws of a specific jurisdiction, which is chosen by the parties. The agreement also provides for the jurisdiction of the courts where disputes arising from the transaction will be resolved.

Conclusion

The ISDA 2013 DF Agreement is a comprehensive document that sets out the standard terms and conditions for OTC derivatives transactions. It provides a framework for the parties to manage their counterparty credit risk and sets out the procedures for the calculation and payment of amounts due. As a professional, I suggest that those who are involved in the derivatives market should be familiar with the key features of this agreement before entering into any OTC derivatives transactions.