Template:M summ 2016 CSA preamble

Note that English law CSAs are Transactions and not Credit Support Documents under the ISDA Master Agreement, whereas the New York law CSAs and English law CSD are Credit Support Documents but not Transactions. Once you are up and running this won’t matter a jot, but if you are trying to get your poor dishevelled mind around this benighted agreement suite, it will surely do it in. But stick with it: your reward will be in heaven. Possibly.

Deep differences between NY and English law CSAs

Unlike a title transfer English law CSA which is expressed to be a Transaction under the ISDA Master Agreement, the 2016 NY Law VM CSA is not: it is instead a “Credit Support Document”: a standalone collateral arrangement that stands aloof and apart from the ISDA Master Agreement and all its little diabolical Transactions.

The reason for this is intensely philosophical: because a English law CSA is a title transfer collateral arrangement, it reverses the indebtedness between the parties outright. An 2016 NY Law VM CSA (and, for that matter, an English law English law CSD) does not: it only provides a security interest for the indebtedness: the in-the-money counterparty is still in-the-money. It is just secured for that exposure. The outright exposure between the parties does not change.

This is the magical, bamboozling stuff of deep ISDA lore. At least where “rehypothecation” is permitted under a 2016 NY Law VM CSA — it pretty much always is — the practical distinction makes no real difference, because even though you say you are only pledging the collateral, in the greasy light of commercial reality, from the moment the Secured Party rehypothecates your pledged assets away into the market, dear Pledgor, you have transferred your title to your collateral outright.