Whitepaper: Collaboration and Standardization Opportunities in Derivatives and SFT Markets

Provision GMRA GMSLA ISDA Master Agreement/

ISDA CSA
1. Core Transaction Mechanics
Transactions/loans The GMRA applies to the sale/repurchase The GMSLA caters for the transfer of The ISDA Master Agreement is product-
of securities (referred to as transactions) securities (referred to as a loan) against agnostic and so does not contain any
against payment of a purchase price/ the transfer of collateral in form of product-specific terms. Collateral or
repurchase price38. securities, cash or letters of credit 39, margin 41 terms can be added using the
A transaction involves an initial sale from rather than a purchase price. appropriate ISDA CSAs, and product
the seller to the buyer against payment of A loan involves an initial transfer terms are contained in asset class-specific
a purchase price, with a corresponding (loan) from the lender to the borrower definitional booklets.
sale from the buyer to the seller against in exchange for an initial transfer of These mechanics would be included
payment of a repurchase price at the end collateral from the borrower to the lender. in the securities financing transaction
of the transaction. At the end of the loan, borrowers have (SFT) definitional booklet (including, for
an obligation to (re)deliver securities example, purchase price and repurchase
equivalent to those borrowed, and lenders price).
have an obligation to deliver collateral
equivalent to that provided to it by the
borrower 40.

Title transfer All transfers of securities under the GMRA All securities and collateral are transferred These mechanics would be included in
are title transfer 42. by way of title transfer 43. the SFT definitional booklet, leveraging
existing ISDA title transfer provisions in
ISDA CSAs/product definitions.

Simultaneous delivery The transfer of securities and the payment Deliveries/payments are required to be These mechanics would be included in
vs. payment of the purchase price are required to be made simultaneously, unless otherwise the SFT definitional booklet.
made simultaneously, unless otherwise agreed45.
agreed44. However, parties can waive the right to a
corresponding payment or delivery from
the other party to be made simultaneously,
where this is due to market practice or
practical difficulties46.

Condition precedent Parties may agree via annex I to introduce Parties can withhold delivery/payment The ISDA Master Agreement 49 provides a
a condition precedent enabling a party where arrangements have not been condition precedent for a party to withhold
to withhold its payments and deliveries made by the other party to ensure that a performance where an event of default
where an event of default has occurred corresponding delivery/payment due will or potential event of default has occurred
and is continuing in relation to the be made48. with respect to the other party.
counterparty 47. For consideration is whether to include
wording similar to that in the GMSLA
in the SFT schedule provisions or SFT
definitional booklet.

Type of securities The GMRA does not cover equities and There are no equivalent restrictions under The ISDA Master Agreement does not
net paying securities (ie, those that the GMSLA. restrict the type of securities that can be
require a withholding tax deduction)50. the subject of a transaction.
Optional wording exists in annex I This would not change in the SFT
to permit the coverage of net paying schedule provisions.
securities51. This is described further in With respect to net paying securities, this
the sub-section entitled Tax Provisions in is described further in the sub-section
the Other section. entitled Tax Provisions in the Other section.

GMRA, Paragraph 1(a)-(b). For convenience, this schedule does not

38 
GMRA, Paragraph 6(c)
44 

distinguish between transactions in the form of repos or buy-sell back GMSLA, Paragraph 1.1
45 

transactions GMSLA, Paragraph 4.3

46 

GMSLA, Paragraph 1.1-2

39 
GMRA, Paragraph 6(j)
47 

GMSLA, Paragraph 4.2

40 
GMSLA, Paragraph 8.6
48 

The terms collateral and margin are used interchangeably herein

41 
ISDA Master Agreement, Section 2(a)(iii)
49 

GMRA, Paragraph 6. Contrast this with the US Master Repurchase

42 
GMRA, Paragraph 1(b)-(c)
50 

Agreement where transactions may be considered secured lending GMRA, Annex I, Paragraph 1(b)
51 

This is unless the 2018 Pledge GMSLA is used

43 

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Provision GMRA GMSLA ISDA Master Agreement/

ISDA CSA
Confirmation of Transaction
Form of confirmation The GMRA sets out a description of what The GMSLA is not prescriptive as to form The ISDA Master Agreement is not
is to be included in each confirmation52 and does not outline information to be prescriptive as to the form of confirmation.
and a template – the form of confirmation included. A form of template confirmation or
at annex II53. confirmations would be appended to the
SFT definitional booklet in the same way
as for other asset classes.

Ordinary Course Termination

Timing of termination Transactions will either terminate on a Loans will either terminate at the end of a Derivatives transactions under the ISDA
fixed repurchase date or, if the transaction fixed period or, if there is no fixed period, Master Agreement typically end on a
is an on demand transaction (ie, no fixed upon notice by the borrower or the lender. date agreed by the parties as part of the
repurchase date), upon notice by either If the lender terminates by notice, the transaction, and so there are no general
the buyer or the seller 54. notice period must be equal to the provisions for dealing with open-ended
Termination will occur after the minimum standard settlement time for the securities transactions.
period customarily required for settlement concerned, and the borrower must This feature would be catered for in the
or delivery of money or equivalent redeliver by the end of this period55. SFT definitional booklet.
securities of the relevant kind from the Except in the case of a fixed-term loan,
date of demand. the borrower may terminate and redeliver
at any time56.

Obligations on Upon termination, the buyer must transfer Upon termination, the borrower must As with the opening leg of transactions/
termination to the seller equivalent securities against deliver securities equivalent to those loans, this feature would be catered for in
the payment of the repurchase price by borrowed58. the SFT definitional booklet.
the seller, less any amount payable and The lender has an equivalent obligation in
unpaid by the buyer to seller in respect of respect of collateral59.
income57.

2. Provisions Catering for Management of a Transaction During the Lifecycle

Margin Provisions
What is margined? At a high level, for repurchase Under a securities loan, the exposure Under the ISDA Master Agreement,
transactions, the security selected for the to be collateralized is the full market margining terms are contained in the ISDA
transaction is a term of the trade, and the value of the security being lent (plus an CSAs.
exposure that needs be margined is the amount of margin representing an agreed If an ISDA CSA is applied by the parties
difference between the current value of percentage of the value of the security). to an ISDA Master Agreement, margin
the bond and the repurchase price at the The GMSLA permits parties to elect in the obligations under that ISDA CSA would
relevant time under the repo, taking into schedule to calculate collateral either: (i) apply to all transactions entered into under
account the applicable margin ratio. on an aggregated basis62; or (ii) on a loan- the ISDA Master Agreement, unless any
Margin is calculated on an aggregated by-loan basis63. Collateral is only payable transactions are specifically carved out64.
basis for all transactions outstanding (ie, by the borrower to the lender. There is a decision to make about whether
in relation to an overall net exposure60) SFTs should also fall under the scope of
and may be payable by either the buyer margining provisions in the ISDA CSA or
or seller. whether separate margining provisions
However, parties can exclude transactions would be included in the SFT schedule
from the aggregated calculation and provisions. Some of the considerations that
instead margin those transactions are relevant to this decision have been set
separately 61. out in subsequent rows.

GMRA, Paragraph 3(b)

52 
GMRA, Paragraph 4(c)
60 

GMRA, Annex 2
53 
GMRA, Paragraph 4(i)
61 

GMRA, Paragraph 3(d)

54 
GMSLA, Paragraph 5.4
62 

GMSLA, Paragraph 8.1

55 
GMSLA, Paragraph 5.5
63 

GMSLA, Paragraph 8.2

56 
For the ISDA CSAs designed to cater for regulatory margin, the scope of
64 

GMRA, Paragraph 3(f)

57  transactions to which the margining provisions apply is limited only to
GMSLA, Paragraph 8.3
58  those to which the margining regulations apply
GMSLA, Paragraph 8.4
59 

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Provision GMRA GMSLA ISDA Master Agreement/

ISDA CSA
Mechanism for If either party has a net exposure to the The lender may on any business day Under the 1995 CSA, margin obligations
calculating required other, it may by notice require the other make a demand for the delivery of further arise in circumstances that, on a given
margin party to make a margin transfer equal to collateral (if a collateral deficiency exists), valuation date, the credit support amount
that net exposure 65. or the borrower may on any business day for a party is not equal to the value of
A net exposure will arise by reference make a demand for the return of excess the credit support balance for that party,
to the respective transaction exposures, collateral71. subject to any applicable minimum
amounts of income payable between the A deficiency or excess will arise by transfer amounts (discussed in later
parties but unpaid, and the sum of net reference to the aggregate market value sections).
margin already provided between the of posted collateral and the aggregate of Credit support balance/exposure
parties. the required collateral value. The amounts Under the 1995 CSA, the credit support
Transaction exposure66 is determined by due and payable between the parties amount includes the relevant party’s
using one of the following two approaches, but unpaid are also taken into account. exposure, which is the amount that
specified by the parties via annex I67: If the income record date has occurred would be payable to/by that party if all
in respect of any securities equivalent to transactions under the ISDA Master
• The function of the repurchase price
loaned securities/non-cash collateral, then Agreement were terminated pursuant to a
and the applicable margin ratio, less the
the amount or market value of income termination event with one affected party
market value of the equivalent securities
payable in respect of such securities is on a particular valuation date72.
at the relevant time (which may be
also considered (if agreed between the
adjusted by reference to a margin Consequently, the concept of exposure
parties).
percentage)68; or under the ISDA Master Agreement relies
The required collateral value is the market on a present value calculation in respect
• The repurchase price, less the adjusted
value of securities equivalent to the loaned of the transactions subject to margining.
value of the equivalent securities (which
securities and the applicable margin. For SFTs, exposure is (predominantly)
is a function of the market value of
such equivalent securities (which may Margin is a percentage of the market based on known values – the repurchase
be adjusted by reference to a margin value of each form of acceptable price (GMRA) and the market value of
percentage) at the relevant time and collateral, specified in the schedule. the loaned securities (GMSLA). Given
the relevant haircut applicable to such Posted collateral is the aggregate market this, it may not be necessary to apply the
equivalent securities)69. value of the collateral delivered to or ISDA concepts of credit support amount/
deposited with the lender (excluding any exposure to SFTs, as the added flexibility
The margin ratio is the market value of the
equivalent collateral repaid or delivered). offered by these concepts may not be
securities at the purchase date divided
necessary.
by the purchase price or such other
proportion agreed by the parties. Parties The credit support amount is also:
may choose a different margin ratio for • Affected by independent amounts73; and
any or all transactions, as well as different • Reduced by thresholds.
types of securities entered into under the
Credit support balance
GMRA70.
The credit support balance includes:
Net margin takes into account: (i) cash
margin paid to each party (including • The aggregate of all eligible credit
accrued interest on cash margin that has support transferred/received between
not been paid to the other party); and the parties; plus
(ii) the market value of margin securities • Any distributions and all proceeds of
posted between the parties. any such eligible credit support or
distributions; plus
• Any equivalent distributions or interest
amount not transferred already.
The concept of a credit support balance
is substantially equivalent to similar
concepts in the GMRA and GMSLA,
and would be applied to SFTs either
by building it into separate margining
provisions within the SFT schedule
provisions or by relying on the existing
ISDA CSA provisions.

GMRA, Paragraph 4(a)

65 
GMRA, Paragraph 4
70 

GMRA, Paragraph 2(xx)

66 
GMSLA, Paragraph 5.4-5
71 

GMRA, Annex I, Paragraph 2(d)

67 
ISDA 1995 CSA, Paragraph 11(c)
72 

GMRA, Paragraph 2(xx)(A)

68 
For the 2016 VM CSA, this concept is not relevant
73 

GMRA, Paragraph 2(xx)(B)

69 

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Provision GMRA GMSLA ISDA Master Agreement/

ISDA CSA
Future exposure There are no equivalent concepts under There are no equivalent concepts under The credit support amount includes the
the GMRA. Instead, a cushion against the the GMSLA. Instead, a cushion against concept of an independent amount, which
risk of the purchased securities falling in the risk of the loaned securities falling in can be specified in respect of each party.
value and the buyer becoming under- value and the lender becoming under- The effect of specifying an independent
collateralized is provided through the collateralized is provided through the amount in respect of a party is to increase
margin ratio mechanism. requirement for margin. the amount of margin that party must
post to the other (ie, to increase the
credit support amount). It is effectively
an add-on to current exposure to cater
for potential future exposure that is not
factored into the exposure calculation.

Quantitative reference There are no equivalent concepts under There are no equivalent concepts under Thresholds
points for a margin the GMRA. the GMSLA. ISDA CSAs typically permit parties to
transfer include a threshold in respect of the other.
This represents an amount of exposure
that the other party is happy not to take
collateral in respect of.
Minimum transfer amounts (MTAs)
Parties may also specify MTAs, which
operate to prevent a party from having to
make a transfer if the amount is below a
certain level (once the amount of such
transfer is above that level, the full amount
needs to be transferred)74.
There are no features equivalent to
thresholds and MTAs in the GMRA and
GMSLA, but their application would be
facilitated for parties in the SFT schedule
provisions.

Eligible collateral There is no concept of a pre-agreed The definition of collateral permits the The definition of eligible credit support
pool of eligible collateral from which the parties to specify in paragraph 1 of the permits the parties to choose which
parties can choose in order to satisfy their schedule the types of collateral that are types of collateral are acceptable for
margining obligations (although this would acceptable to the lender. the purposes of satisfying margining
normally be agreed separately from the obligations.
GMRA). Rather, the definition of margin This would not be changed in the SFT
securities requires that they be securities schedule provisions.
of a type and value reasonably acceptable
to the party calling for the relevant margin
transfer.

Repricing Instead of margining, parties may agree There is no equivalent concept under the There is no equivalent concept under
to reprice a transaction by adjusting the GMSLA. the ISDA Master Agreement or the ISDA
purchase price or identity/amount of CSAs76, as matters such as this would
securities to eliminate exposure75. be addressed in the confirmation for the
relevant transaction/applicable definitions.
This would be catered for in the SFT
definitional booklet in relation to
repurchase transactions.

ISDA CSAs also provide for parties to specify a rounding convention in

74 
GMRA, Paragraph 4(j)-(l)
75 

relation to delivery amounts and return amounts, which would also be Although this concept does exist for mark-to-market cross-currency
76 

catered for in the SFT schedule provisions swaps in the 2006 ISDA Definitions

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Provision GMRA GMSLA ISDA Master Agreement/

ISDA CSA
Satisfying a margin A margin call is satisfied by making A margin call is satisfied by making a Under the ISDA CSAs, margin calls are
call a margin transfer77 of either cash or repayment and/or delivery of equivalent satisfied by the relevant party making a
securities reasonably acceptable to the collateral82 (if lender to borrower) or transfer of eligible credit support to the
receiving party78. providing further collateral83 (if borrower other party.
The party making the transfer may decide to lender). This feature would be retained/included
on the combination of cash and securities, Where aggregated margining applies84, for SFTs.
provided that when the receiving party unless the parties have elected otherwise,
had previously posted cash or securities the GMSLA provides that requirements
as margin that have not been returned, to deliver equivalent collateral or provide
it can require the margin transfer to further collateral can be netted to allow for
be satisfied by delivery of such cash or a single net delivery of collateral between
securities79. the parties.
If a party is unable to transfer equivalent Where parties margin on an aggregated
margin securities, then it must basis, and a party is required to deliver
immediately pay cash margin equal to the further collateral or redeliver equivalent
value of those securities80. If this failure collateral to the other party, the GMSLA
persists for two business days, the other also provides for the allocation of such
party may require the transferring party delivery or redelivery to individual loans,
to pay a cash equivalent amount equal to so that at the maturity of each loan, the
the default market value of the equivalent equivalent collateral to be delivered by the
margin securities that the receiving party lender to the borrower is ascertainable.
determines81.

Failures to deliver See sub-section entitled Failure to Deliver See sub-section entitled Failure to Deliver See sub-section entitled Failure to Deliver
and Mini Close-out under Other and Mini Close-out under Other and Mini Close-out under Other

Income payments Where income is paid in relation to Where income is paid in relation to In the 1995 CSA, the transferee is
securities purchased by the buyer, the securities and collateral, the receiving required to transfer to the transferor any
buyer must transfer to the seller an party must transfer an equivalent amount distributions (or equivalent distributions)
amount equal to that income payment85. to the other party. These provisions largely and interest amounts received on
A similar provision applies to any income mirror those of the GMRA. collateral by the transferee, provided that
paid in relation to margin securities (ie, Income is broadly defined as including no delivery amount would be created or
securities held by the seller)86. any interest, dividends or other increased by such transfer.
Income is broadly defined as including, distributions of any kind whatsoever with This feature would be retained/included
with respect to any security at any time, respect to any securities or collateral87. for SFTs.
all interest, dividends or other distributions Apart from interest amounts on collateral,
thereon. there are no income provisions in the
ISDA Master Agreement/CSA, as any such
payments would be addressed in the
confirmation of a transaction referencing a
security (or the applicable definitions)88.

Indemnity for failure The GMRA does not contain an indemnity The GMSLA provides for an indemnity There is no equivalent concept under the
to redeliver equivalent equivalent to that set out in the GMSLA from the lender to the borrower in respect ISDA Master Agreement.
non-cash collateral of losses suffered by the borrower if the This would be catered for in the SFT
borrower has called for the delivery of schedule provisions in relation to
equivalent non-cash collateral prior to an securities loans.
income record date and the lender fails to
transfer it89.

GMRA, Paragraph 2(dd)

77 
GMSLA, Paragraph 5.5
84 

GMRA, Paragraph 4(a). Please note that securities defines both the
78 
GMRA, Paragraph 5(a)
85 

scope of the securities that can be the subject of repo, as well as that GMRA, Paragraph 5(b)
86 

which can be provided as margin GGMSLA, Paragraph 2

87 

GMRA, Paragraph 4(d)

79 
For example, the treatment of dividends in the equity derivatives
88 

GMRA, Paragraph 4(h)(i)

80  definitions
GMRA, Paragraph 4(h)(ii)
81 
GMSLA, Paragraph 6.4, which applies unless otherwise elected in
89 

GMSLA, Paragraph 5.4/5(b)

82  schedule
GMSLA, Paragraph 5.4/5(c)
83 

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Provision GMRA GMSLA ISDA Master Agreement/

ISDA CSA
Substitution The GMRA permits the seller, if the The GMSLA permits the borrower to Similar substitution provisions are
buyer agrees, to substitute securities substitute collateral it has provided to contained in the ISDA CSA for margin.
equivalent to purchased securities for the lender with alternative collateral Under the 1995 CSA, the transferor
different securities that have a market acceptable to the lender91, provided this may, with the consent of the transferee,
value at such date at least equal to the would not trigger a margin obligation92. substitute eligible credit support for new
market value of the equivalent securities credit support.
transferred to seller.
This feature would be retained/included
With respect to margin securities, either for SFTs.
party can request the substitution of any
of those equivalent margin securities with
new margin securities having a market
value at such date at least equal to that
of such equivalent margin securities. The
substitution shall be effected only if the
other party agrees90.

3. Representations and Warranties

Representations The GMRA contains a standard selection The GMSLA contains a series of The ISDA Master Agreement’s basic
of representations by each party, and warranties (rather than representations as representations in relation to an entity’s
these are repeated each time any contained in the GMRA). These are made status, powers and authority align with
transaction is entered into or transfers on a continuing basis. those under the GMRA and GMSLA97.
occur under that transaction. Among The content of these warranties broadly The ISDA Master Agreement contains
other things, these relate to: corresponds with the representations of additional representations relating to:
• The party having the authority to the GMRA, and relate to: • Absence of event of default or potential
execute the agreement and enter into • The authority and capacity of the parties event of default;
the transactions; to enter and perform obligations under • Absence of litigation; and
• That it enters into the GMRA on its own the agreement;
• Tax representations.
behalf; • The ability of the parties to make
The unique warranty in the GMSLA would
• That entering into the GMRA will outright transfers of securities; and
be included within the SFT schedule
not violate any law or regulatory 95
• That parties are acting as principal . provisions, but otherwise retaining
requirement 93.
It contains a unique warranty, made the ISDA Master Agreement’s suite
It contains a unique representation that by the borrower, to the effect that it is of representations. The ISDA Master
states (unless there is a written agreement not entering into a loan for the primary Agreement also contains ‘agreements that
to the contrary) it is not relying on any purpose of obtaining or exercising voting parties will furnish specified information,
advice from the other party external to rights in respect of the loaned securities96. maintain authorizations, comply with
the GMRA, and that it fully understands laws, notify the other where tax becomes
the terms of and risks associated with payable and pay stamp duty. In the GMRA
entering into the agreement94. This and GMSLA, similar tax provisions98
is often included in part 5 of an ISDA are found elsewhere, and the other
schedule as an additional representation agreements are largely covered by the
(see part 5[(m)] of the template schedule representations/warranties in those
appended to the ISDA Master Agreement). documents. This point would not be
separately addressed in the SFT schedule
provisions.

GMRA, Paragraph 8
90 
GMSLA Paragraphs 13-14
95 

GMSLA, Paragraph 5.3

91 
GMSLA, Paragraph 14(e)
96 

GMSLA, Paragraph 5.4 or 5.5 as applicable

92 
ISDA Master Agreement, Section 3(a)
97 

GMRA, Paragraph 9
93 
GMRA, Paragraph 11; GMSLA, Paragraph 12
98 

GMRA, Paragraph 9(g)

94 

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Provision GMRA GMSLA ISDA Master Agreement/

ISDA CSA
Agency Parties are separately able to elect to As under the GMRA, parties are able While the ISDA Master Agreement does
execute the GMRA as an agent if needed to elect to execute the GMSLA as an not include template wording catering
through the agency annex99, resulting in agent100, resulting in a separate GMSLA for the situation that the agreement
a separate GMRA with each underlying with each underlying principal. is executed by an agent acting for
principal. underlying principals, such wording is
often included by parties, and example
wording is available in the ISDA Clause
Library.
For consideration is whether agency is
addressed in the SFT schedule provisions
separately from the wording in the ISDA
Clause Library.

4. Default and Termination

Events of default The GMRA contains the following events The GMSLA contains the following events The ISDA Master Agreement contains
of default101: of default, which largely mirror those events of default that largely align with
• Failure to pay the purchase price on the contained in the GMRA: those contained in the GMRA and
purchase date or the repurchase price • Failure to pay or repay cash collateral, or GMSLA, with the addition of those that are
on the repurchase date; to deliver collateral; listed below103:

• If specified as applicable in annex I, • Failure to make manufactured payments • Credit support default;
failure to deliver purchased securities in respect of loaned securities or non- • Default under specified transaction;
on the purchase date or equivalent cash collateral (grace period of three • Cross default104; and
securities on the repurchase date, days)102;
• Merger without assumption.
in either case within the standard • Failure to pay any sum due under the
settlement time for delivery of those The ISDA Master Agreement’s events
mini close-out provisions upon the due
securities; of default would be retained and
date;
supplemented in the SFT schedule
• Failure to pay any sum due in • An act of insolvency; provisions as applicable with those of the
circumstances where the mini close-out
• A warranty is incorrect or untrue in a GMRA and GMSLA.
provisions have been applied;
material respect; Regarding the different approaches taken
• Failure to comply with the margin
• Admission of an inability to, or intention by the GMRA and GMSLA to failures
maintenance provisions;
not to, perform; to deliver, see the sub-section entitled
• Failure to pay manufactured dividends; Failure to Deliver and Mini close-out
• Transfer of all or any material part of
• An act of insolvency occurs in relation to the assets of the lender or borrower to a under Other.
the relevant party; trustee by a regulatory authority;
• Representations are incorrect or untrue • Action taken in respect of a party by
in any material respect; a securities exchange or regulatory
• Admission by a party of its inability to, authority on the grounds that it has
or intention not to, perform obligations failed to meet any requirements relating
under the GMRA; to financial resources or credit rating;
• Being declared in default by or being and
suspended from membership of any • Breach of any other obligation (grace
securities exchange or being prohibited period of 30 days).
from dealing in securities by any The different approaches taken by the
competent authority, on the grounds of GMRA and GMSLA to failures to deliver
failure to meet requirements relating to are covered under the sub-section entitled
financial resources or credit rating; and Failure to Deliver and Mini Close-out
• Failure to perform any other obligation(s) under Other.
under the agreement that is not
remedied after a 30-day grace period.

GMRA, Annex I
99 
ISDA Master Agreement, Section 5(a)
103 

100 
GMSLA, Agency Annex Please note that cross default would only apply where parties elected
104 

101 
GMRA, Paragraph 10(a) for its inclusion
102 
GMSLA, Paragraph 10.1(b)

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Provision GMRA GMSLA ISDA Master Agreement/

ISDA CSA
Termination events The GMRA contains provisions largely Termination events are not contemplated The ISDA Master Agreement’s termination
corresponding to the tax event termination by the GMSLA. events cater for the termination of certain
event in the ISDA Master Agreement105. or all transactions in circumstances where
no fault is attributable.
If an event giving rise to a termination
event is also an event of default, it will be
treated as an event of default106.
The applicability of termination events
would be retained with respect to
transactions entered into under the SFT
schedule provisions, which would involve
introducing illegality and force majeure as
termination events for SFTs.

Notice of event of The GMRA requires that each party The GMSLA requires that each party A similar effect is achieved by virtue of
default immediately notify the other of an event of notify the other of an event of default, or the ongoing representation at section 3(b)
default, or an event that upon service of a an event that would become one upon of the ISDA Master Agreement 109, which
notice would be an event of default, which service of a notice, which occurs in relates to absence of an event of default or
occurs in relation to it 107. relation to it 108. potential event of default.
This would not be changed in the SFT
schedule provisions.

5. Consequences of an Event of Default/Termination Event

Event of default The event of default will not (unless There is no event of default unless a Events of default
and designation of automatic early termination on insolvency default notice is served (unless automatic Unless automatic early termination on
termination date has been elected110) trigger a termination early termination on insolvency has been insolvency has been elected114, when
of the agreement unless the non- elected113). an event of default has occurred and
defaulting party gives notice designating The termination date is not designated by is continuing, the non-defaulting party
an early termination date and such event either party, but is instead the time that may designate a date (not earlier than
of default is continuing at that time111. the relevant event of default occurs (which the effective date of the notice) as an
This notice must – by not more than itself is triggered by the default notice early termination date and terminate all
20 days’ notice to the defaulting party described earlier). outstanding transactions115.
specifying the relevant event of default The notice period must be no more than
– designate an early termination date in 20 days.
respect of all outstanding transactions112.
This architecture (which is equivalent to
that in the GMRA) would be retained for
transactions entered into under the SFT
schedule provisions.
Termination events
If a termination event other than force
majeure occurs, the affected party must
promptly notify the other party, specifying
the nature and each affected transaction.
It must provide any information about that
termination event as the other party is
likely to require.
In the case of force majeure, each party
should make all reasonable efforts to
promptly notify the other, again specifying
the nature of the termination event
and providing reasonably required
information116.
Continued on next page

GMRA, Paragraph 11
105 
GMRA, Paragraph 2(r)
111 

ISDA Master Agreement, Section 5(c)

106 
GMRA, Paragraph 10(b)-(c)
112 

GMRA, Paragraph 10(m)

107 
GMSLA, Paragraph 10.1(d)
113 

GMSLA, Paragraph 10.2

108 
ISDA Master Agreement, Section 6(a)
114 

ISDA Master Agreement, Section 3(b)

109 
ISDA Master Agreement, Section 6(a)
115 

GMRA, Paragraph 10(b); GMRA, Annex I

110 
ISDA Master Agreement, Section 6(b)
116 

40
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Continued from previous page

Following a termination event, the

exact process depends on the specific
termination event117 (for example, illegality
and force majeure are subject to a waiting
period118).
This architecture would be retained for
transactions entered into under the SFT
schedule provisions.

Effect of designation The occurrence of an early termination When a written notice of an event of Following termination, all existing and
of early termination date triggers the acceleration of both default is given, both parties’ payment and future obligations in relation to the
date/termination date parties’ payment and delivery obligations delivery obligations are accelerated and terminated transactions are extinguished
in relation to outstanding transactions and cash-valued in the base currency. and replaced by a single obligation to pay
repayment of margin. The different sums due by each party to a net sum121. This net sum is calculated
These accelerated obligations are then the other are then set off against each pursuant to section 6(e)122.
cash-valued in the base currency and other to produce a net amount120. There is a decision to make about whether
set off against one another to produce This is covered further in the Components to apply the provisions of section 6(e) to
an obligation to pay a net amount on the of Close-out section. SFTs under the SFT schedule provisions.
early termination date119. This is covered further in the Components
This is covered further in the Components of Close-out section.
of Close-out section.

Close-out statement The non-defaulting party must provide the There is no obligation on the non- Parties are required to provide a statement
defaulting party with a statement showing defaulting party to provide the defaulting showing the calculation of an early
in reasonable detail the calculations made party with a calculation statement. termination amount, including details of
to arrive at the net amount and specifying how the figure was established and the
the balance payable. account information for payment123.
For the SFT schedule provisions, all
terminations (ie, even for mini close-outs)
would require the non-defaulting party to
serve this calculation statement.

Which party The non-defaulting party. The non-defaulting party124. For events of default, the non-defaulting
determines? party.
For termination events, either the affected
party or both parties, depending on the
event.
This would not be changed in the SFT
schedule provisions.

Reference date for The default valuation time is on or about In contrast with the GMRA, the default Each close-out amount is determined as
termination amounts/ the early termination date125. valuation time is the close of business of the early termination date or the next
values in the appropriate market on the fifth commercially reasonable date127, which
dealing day after the date on which the provides additional flexibility as compared
event of default occurs or, in the case with the GMRA and GMSLA. There is
of automatic early termination, the fifth a decision to make about whether this
dealing day after the day on which the additional flexibility is required for the SFT
non-defaulting party first became aware of schedule provisions given the assumption
the occurrence of such event of default126. that SFTs should be easier to value than
derivatives transactions.

ISDA Master Agreement, Section 6(b)

117 
ISDA Master Agreement, Section 6(d)
123 

ISDA Master Agreement, Section 5(d)

118 
GMSLA, Paragraph 11.3
124 

GMRA, Paragraph 10(d)(ii)

119 
GMRA, Paragraph 10(f)
125 

GMSLA, Paragraph 11.2(b)

120 
GMSLA, Paragraph 11.3(b)
126 

ISDA Master Agreement, Section 6(c)

121 
ISDA Master Agreement, Section 14
127 

ISDA Master Agreement, Section 6(e)

122 

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 Whitepaper: Collaboration and Standardization Opportunities in Derivatives and SFT Markets

Provision GMRA GMSLA ISDA Master Agreement/

ISDA CSA
Components of The non-defaulting party determines the The non-defaulting party determines the The calculation of the final amount due
close-out following in respect of all transactions128: following in respect of all loans129: occurs by taking the sum of the close-out
• The default market value of equivalent • The default market value of equivalent amounts in respect of each terminated
securities and equivalent margin securities and equivalent non-cash transaction together with the unpaid
securities to be transferred (which, per collateral to be delivered; amounts owing to the non-defaulting party
the definition of default market value, (determined by the non-defaulting party)
• The amount of any cash collateral to be
will include any coupon payments less any unpaid amounts owed to the
repaid (including interest accrued); and
accrued but not yet paid); defaulting party.
• The amount of any other cash to be paid
• The amount of any cash margin There is a decision to make about whether
by each party.
(including interest accrued) to be to apply the provisions of section 6(e),
On the basis of these determinations, including the concept of close-out amount
transferred;
parties must calculate what sum is due (covered in row (v) of this section), to
• The repurchase prices to be paid by from each party to the other, and these SFTs under the SFT schedule provisions.
either party; amounts are set-off to produce a net Proposals are set out in each row
• The cash equivalent amounts to be paid amount130. accordingly.
by either party. For ease of comparison, the components For ease of comparison, the components
On the basis of these determinations, of these amounts are broken out in rows of these amounts are broken out in rows
the non-defaulting party calculates what (i) to (vii). (i) to (vii).
is due from each party to the other and
sets these amounts off to produce a net
amount.
For ease of comparison, the components
of these amounts are broken out in rows
(i) to (vii).

(i) Amounts due but Any amounts due between the parties, Any amounts due between the parties, Any amounts that had become due and
unpaid as at reference including income payments, that had including income payments and any not been paid134, as well as interest on
date not been paid would be included within interest accrued, that had not been paid those amounts, would become unpaid
amounts due from each party to the would be included within the acceleration amounts for the purposes of the early
other under the agreement set out in of obligations set out in paragraph 11.2132. termination amount calculation135.
paragraph 10(d)(ii). This could also This could include interest, overdraft and The same approach would be taken to
include costs associated with replacement costs incurred as a result of late delivery equivalent amounts due under SFTs
of transactions and unwinding of hedges of equivalent securities or equivalent for the purposes of the SFT schedule
where a mini-close out had occurred collateral, including buy-in costs133. provisions.
before the early termination date.
Interest that has accrued on any such
amounts is also payable within the net
amount (this is separate to interest
payable on the termination amount, which
is addressed later)131.

(ii) Acceleration of Under the GMRA, if an early termination The parties’ payment obligations are The ISDA Master Agreement uses the
post-reference date date occurs, the repurchase date for accelerated to require performance at the concept of close-out amount to value
payment obligations each transaction is brought forward to the time the event of default occurred (the future payment and delivery obligations.
early termination date, such that each termination date)137. The concept of close-out amount and its
repurchase price is payable as of such potential application to SFTs is discussed
early termination date136. in row (v) of this section.
Continued on next page

GMRA, Paragraph 10(d)(i)

128 
The 2016 VMSA clarifies that no unpaid amount will be determined
134 

GMSLA, Paragraph 11.2(a)

129  with respect to any unsatisfied delivery amounts and return amounts.
GMSLA, Paragraph 11.2
130  Rather, these will be reflected in the close-out amount calculations
GMRA, Paragraph 10(d)(ii); Paragraph 12
131 
ISDA Master Agreement, Section 14, definition of unpaid amount
135 

GMSLA, Paragraph 11.2

132 
IGMRA, Paragraphs 10(c) and (d)(i)
136 

GMSLA, Paragraph 9.3

133 
GMSLA, Paragraph 11.2
137 

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Continued from previous page

As the obligations in the GMRA and

GMSLA do not require a present value
calculation in relation to these amounts, a
nearer equivalent in the ISDA architecture
would be the way cash collateral is treated
under the ISDA CSAs. Following an event
of default, cash collateral would form part
of the credit support balance, the value
of which will be deemed to be an unpaid
amount for the purposes of the early
termination amount calculation. A similar
mechanism could apply with respect to
the SFT schedule provisions.

(iii) Acceleration of Under the GMRA, if an early termination Under the GMSLA, if an event of default Following an event of default, securities
post-reference date date occurs, any obligation to deliver occurs, any obligation to deliver equivalent collateral is valued and forms part of the
obligation to return equivalent securities, and any obligation securities, and any obligation to deliver credit support balance, the value of which
securities to deliver equivalent margin securities, is equivalent non-cash collateral, is brought will be deemed an unpaid amount for the
brought forward to the early termination forward to the termination date. purposes of the early termination amount
date. The securities are valued at their default calculation.
The securities are valued at their default market value and converted into a cash A similar mechanism could be applied
market value and converted into a cash amount. with respect to the SFT schedule
amount. provisions.

(iv) Requirement to Cash margin (including interest accrued) Cash collateral (including interest Following an event of default, cash
return/repay all cash to be transferred and cash equivalent accrued) to be repaid and any other cash collateral forms part of the credit
margin and all other amounts to be paid shall become due at amounts to be paid are accelerated for the support balance, the value of which will
cash amounts the early termination date. purposes of the termination date. be deemed an unpaid amount for the
purposes of the early termination amount
calculation.
A similar mechanism could be applied with
respect to the SFT schedule provisions.

(v) Termination of There is no equivalent concept under the There is no equivalent concept under the The ISDA Master Agreement uses the
future payment GMRA. GMSLA. concept of the close-out amount as the
obligations and means of valuing transactions, which
determination of their requires an assessment of the present
present value value of future cashflows and delivery
obligations under each transaction that is
being terminated.
As under the GMRA and GMSLA, external
sources are contemplated as providing
valuations for securities in order to
determine the close-out amount. Parties
are encouraged to reference quotations,
market data and information from internal
sources when explaining in detail how their
calculations were achieved138. Commercial
reasonableness is key when establishing
whether the procedures reaching the
valuation are sufficient139. These are
calculated on or as soon as practicable
following the early termination date140.
There is a decision to make about
whether to apply the concept of close-out
amount to any element of the close-
out calculations for SFTs under the
SFT schedule provisions. For SFTs, as
valuations of securities do not require the
same flexibility as may be required for
(often illiquid) derivatives transactions, it
may not be necessary to apply the close-
out amount concept to SFTs.

ISDA Master Agreement, Section 6(d)(i)

138 
ISDA Master Agreement, Section 6(d)(i)
140 

ISDA Master Agreement, Section 14

139 

43
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Provision GMRA GMSLA ISDA Master Agreement/

ISDA CSA
(vi) Conversion of all All sums not denominated in the base For the purposes of this calculation, All resulting cash amounts are converted
resulting cash amounts currency shall be converted to the base any sum not denominated in the base into the termination currency equivalent
into a single currency currency at the spot rate141, which for the currency shall be converted into the base of those amounts. This requires the
purposes of the termination calculation is currency at the spot rate prevailing at determining party to select a foreign
to be obtained by the non-defaulting party such dates and times determined by the exchange agent in good faith (or, if both
by reference to a pricing source or quoted non-defaulting party acting reasonably143. parties are determining parties, the
by a bank142. agent must be agreed) to conduct the
conversion at 11.00am in the city in which
such foreign exchange agent is located144.
This would not be changed in the SFT
schedule provisions.

(vii) Accrual of Interest will accrue on the net amount The GMSLA only caters for interest on Equivalent provisions to those set out in
interest from the final from the early termination date to, but the net amount if the net amount is not the GMRA in respect of interest are set
determination of net excluding, the date of payment145. paid on the business day after account is out in the ISDA Master Agreement147.
termination amount taken146. This would not be changed in the SFT
until payment schedule provisions.

Calculating value of There are different options for valuing the There are different options for valuing the With respect to valuing securities, the
securities securities: actual sale proceeds/purchase securities: actual buy-in/sale price; quotes ISDA CSA mechanism involves the
costs; quotes from market makers; and from market makers; and fair market valuation agent determining the bid price
fair market value determined by the non- value determined by the non-defaulting of the relevant securities151.
defaulting party. party. For the SFT schedule provisions, the
The default market value in respect of The default market value in respect of features common to the default market
equivalent securities or equivalent margin equivalent securities or equivalent margin value calculations in the GMRA and
securities is determined as follows: securities is determined as follows: GMSLA would be added in.
• If the non-defaulting party has sold/ • If the non-defaulting party has
bought identical securities from the purchased receivable securities or sold
same issuance, the net proceeds/ deliverable securities, it may elect to
purchase price (less expenses etc); treat as the default market value the net
• If the non-defaulting party has received proceeds of sale or net purchase costs;
offers/bids in respect of securities • If the non-defaulting party has received
of the relevant description from two an offer securities or bid securities
or more market makers or regular quotations from two or more market
dealers in the appropriate market in makers in a commercially reasonable
a commercially reasonably size, with size, it may elect to treat the price
a customary pricing methodology, the quoted (or the mean if there is more
price quoted (after deducting reasonably than one quote) as the default market
anticipated expenses) and adjusted in a value.
commercially reasonable manner by the Alternatively, the non-defaulting party may
non-defaulting party to reflect accrued determine the net value of the relevant
but unpaid coupons not reflected in the securities and treat the net value as the
quotes obtained. default market value149 if, acting in good
The non-defaulting party may determine faith, it has:
a net value in respect of the relevant • Endeavored but been unable to sell
securities and treat that net value as the or purchase securities or to obtain
default market value if it has: quotations; or
• Endeavored but been unable to sell or • Determined that it would not be
purchase securities or obtain quotations; commercially reasonable to sell or
• Determined that it would not be purchase securities at the prices bid
commercially reasonable to sell or or offered or obtain such quotations,
purchase securities at the prices bid or or that it would not be commercially
offered, or obtain or use the relevant reasonable to use any quotations that it
quotations. has obtained.
Continued on next page Continued on next page

GMRA, Paragraph 10(d)(ii)

141 
GMRA, Paragraph 10(d)
145 

GMRA, Paragraph 2(ss), definition of spot rate

142 
GMSLA, Paragraph 11.2(b) and Paragraph 15
146 

GMSLA, Paragraph 11.2(b)

143 
ISDA Master Agreement, Paragraph 9(h)(ii)(2)
147 

ISDA Master Agreement, Section 6(e) and Section 14, definition of

144 
GMSLA, Paragraph 11.4-5
149 

termination currency equivalent 1995 CSA and 2016 VM CSA, Paragraph 10, definition of value
151 

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Continued from previous page Continued from previous page

The net value is a fair market value The net value is an amount that, in the
reasonably determined by the non- reasonable opinion of the non-defaulting
defaulting party and derived from pricing party, represents the fair market value with
sources (including trading prices) and regard to pricing sources and methods as
based on pricing methods the non- appropriate.
defaulting party considers appropriate, If, at the default valuation time, the
less transaction costs that would be non-defaulting party determines that it is
incurred or reasonably anticipated in not reasonably practicable to determine
connection with the purchase or sale of a commercially reasonable net value of
such securities148. the securities, the non-defaulting party
may determine its net value as soon as is
reasonably practicable after the default
valuation time150.

Adjustments for There is no equivalent concept under the There is no equivalent concept under the Where an early termination date occurs
payments/ GMRA. GMSLA. pursuant to automatic early termination
deliveries in case on insolvency (where it has been elected),
of automatic early the early termination amount is subject
termination on to adjustments to reflect payments or
insolvency deliveries made by one party to the other
during the period from the relevant early
termination date to the date for payment
determined under section 6(d)(ii)152.
This would not be changed in the SFT
schedule provisions.

When is the net On the business day following the date of Payment by the owing party must be Either:
amount payable? the early termination statement153. made on the next business day after set- i) For events of default, on the day on
off has been effected154. which notice of the amount payable is
effective; and
ii) For termination events, on the day which
is two local business days after the day
on which notice of the amount payable
is effective (or, if there are two affected
parties, after the day on which the
statement provided pursuant to clause
(i) by the second party to provide such a
statement is effective)155.
This would not be changed in the SFT
schedule provisions.

Expenses and other The defaulting party will be liable for The defaulting party is liable to the The defaulting party is liable for the
costs the non-defaulting party’s expenses in non-defaulting party for legal and other expenses of the non-defaulting party
connection with the default, together with professional expenses incurred as a result incurred in connection with the event of
interest thereon156. of the event of default, together with default158.
The non-defaulting party is also entitled interest thereon157. This would not be changed in the SFT
to costs associated with replacement schedule provisions.
transactions or unwinding of hedges.

GMRA, Paragraph 10(e)(iii)

148 
ISDA Master Agreement, Section 6(d)(ii)
155 

GMSLA, Paragraph 11.6

150 
GMRA, Paragraph 10(d)(iii)
156 

ISDA Master, Section 6(e)(iii)

152 
GMSLA, Paragraph 11.7
157 

GMRA, Paragraph 10(g)

153 
ISDA Master Agreement, Section 11
158 

GMSLA, Paragraph 11(2)(b)

154 

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Provision GMRA GMSLA ISDA Master Agreement/

ISDA CSA
Other remedies No remedies, except those set out in the No remedies, except those set out in the The provisions of the GMRA and GMSLA
agreement, may be sought by either party agreement, may be sought after an event contrast with those of the ISDA Master
in respect of any event of default159. of default160. Agreement, which notes that, except
as specifically provided, the remedies
and rights provided by the ISDA Master
Agreement are not exclusive of those
provided by law161. However, parties to the
ISDA Master Agreement agree that neither
party may recover additional damages
as a consequence of a termination of the
agreement162.
This would not be changed in the SFT
schedule provisions.

Consequential loss The GMRA does not generally permit The GMSLA does not generally permit The ISDA Master Agreement caters for
recovery of consequential loss163, but recovery of consequential loss164, but costs of replacement transactions and
does permit costs associated with permits recovery of expenses (including hedging in the concept of close-out
replacement transactions or unwinding of buy-in costs) resulting from any failure to amount166.
hedges where a transaction is closed out deliver on time165 (not just where an event There is a decision to make about
early to be recovered. This applies not just of default has occurred). whether to apply the concept of close-out
where an event of default has occurred, amount to SFTs under the SFT schedule
but also in the context of the mini close- provisions. If this is concept is not applied,
out provisions, referred to in the Other the SFT schedule provisions would
section. replicate as far as possible the positions in
the GMRA and GMSLA.

6. Other
Failure to deliver and Parties may elect (in the annex) for Under the GMSLA, a failure by the lender Under the ISDA Master Agreement
mini close-out a failure by the seller to deliver the to lend the securities in the first place is (and CSA), failure to deliver collateral
purchased securities on the purchase not an event of default. constitutes a potential event of default170
date (or the buyer failing to deliver A failure by the borrower to deliver with respect to all transactions. Failure to
equivalent securities on the repurchase equivalent securities is also not an event deliver under a transaction may constitute
date) to constitute an event of default. of default. Rather, the lender can decide a potential event of default with respect
If it is not an event of default, the non- to continue the loan or elect for a mini to all transactions, but only if, under the
defaulting party may require the failing close-out and terminate it in accordance relevant confirmation or definitions, the
party to pay cash margin to cover any with the GMSLA termination provisions. obligation to deliver is non-conditional
transaction exposure. If the failure and not subject to any specific fallback
A failure by the lender to deliver
continues, the non-defaulting party may, provisions.
equivalent non-cash collateral is also not
by notice to the other, elect for a mini an event of default – the borrower can The SFT schedule provisions would
close-out of the relevant transaction167. decide to continue the loan or elect for a amend the failure to deliver event of
Similar provisions exist catering for failures mini close-out. default to preserve the optionality in both
by either party to transfer equivalent the GMRA and GMSLA.
Where there is a failure to deliver by either
margin securities, where such failure is party as described, the party responsible
on account of any reason relating to the for that failure is liable for any interest,
securities or the clearing system through overdraft or similar costs and expenses
which the securities are to be transferred incurred by the other party. This must be
and the transferring party has made all paid within one business day of a demand
reasonable efforts to make the transfer168. of transferee169.

GMRA, Paragraph 10(j)

159 
GMSLA, Paragraph 9.3
165 

GMSLA, Paragraph 10.3

160 
ISDA Master Agreement, Paragraph 14
166 

ISDA Master Agreement, Section 9(d)

161 
GMRA, Paragraph 10(h) and (i)
167 

ISDA Master Agreement, Section 6(e)(v)

162 
GMRA. Paragraph 4(h)
168 

GMRA, Paragraph 10(k)-(l)

163 
GMSLA, Paragraph 9.3
169 

GMSLA, Paragraph 10.4

164 
ISDA Master Agreement, Section 5(a)(i)
170 

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Provision GMRA GMSLA ISDA Master Agreement/

ISDA CSA
Set-off The GMRA includes a contractual set-off The GMSLA provides, at the option of The early termination amount payable is
clause that provides that the net amount the non-defaulting party, for the set-off of subject to a right of set-off. This means
payable to the payee following an event any amount payable by one party to the that the net value owed will, at the option
of default may, at the option of the non- other following an event of default against of the non-defaulting party, be set off
defaulting party, be set off against any any amount payable by the other party against any other amounts payable to the
amount payable from the payee party under any other agreement or instrument payer to the payee. The non-defaulting
to the paying party under any other between the parties172. party may, in good faith, estimate the
agreement between them171. value of an unascertained obligation173.
Parties would also be able to set-off
termination amounts in respect of SFTs,
whether because any termination amount
in relation to SFTs is included within the
definition of early termination amount, or
(if an alternative approach is taken) the
ISDA set-off provision is amended in the
SFT schedule provisions.

Tax provisions Under the GMRA, the general position Under the GMSLA, the general position is Under the ISDA Master Agreement, the
is that all money payable is to be paid that all payments are to be made without general position is that all payments
without withholding or deduction for any any deduction or withholding for or on will be made without any deduction or
taxes or duties174. account of any tax unless required by withholding for tax, unless such deduction
In circumstances where any taxes are applicable law. or withholding is required by applicable
payable, the paying party is required to If the paying party is required to deduct/ law.
pay such additional amounts as will result withhold, that party shall: If a party is required to withhold, that party
in the net amounts receivable by the • Notify the other party; (X) will have to (among other things):
other party being equal to such amounts • Notify the other party (Y);
• Pay or otherwise account for the full
as would have been received by it had
amount required to be deducted or • Pay to the relevant authorities the
no taxes or duties been required to be
withheld to the relevant authority; and full amount required to be deducted/
withheld or deducted.
• Pay to the other party such additional withheld; and
However, in these circumstances, the
amount as is necessary to ensure the • If the relevant tax is an indemnifiable
paying party may elect to terminate the
net amount actually received by the tax, pay to Y such additional amount as
relevant transaction by notice175. In which
recipient will equal the amount the is necessary to ensure the net amount
case, the receiving party can elect to
recipient would have received had no actually received by Y would be the
continue the transaction and indemnify
such deduction or withholding been amount Y would have received had no
the paying party against the gross-up
required177. deduction or withholding been required
payment176. This is the case even if the
optional wording to cover net paying However, the payer will not be required to (a gross-up payment).
securities has been included in annex I. pay any additional amount to the recipient However, X would not be required to make
to the extent it would not be required to such gross-up payment where it would not
be paid for the failure by the recipient to have been required but for:
comply with or perform any obligation to • The failure of Y to comply with or
deliver certain requested tax forms. perform any agreement contained in
With respect to income, however, the section 4(a)(i), (iii) or 4(d) – ie, a failure
position under the GMSLA is that the of Y to deliver certain requested tax
payer must pay to the other party such forms; or
amounts as agreed between the parties • The failure of a tax representation made
or, failing such agreement, the amount by Y to be accurate and true (subject
the lender would have received assuming to certain provisos, including a change
such securities were not loaned to the in the law after a transaction is entered
borrower. This may require specific into).
provision in the SFT schedule provisions.
If there is a change in tax law or regulatory
practice, the party suffering the adverse
financial consequence may have the
ability to terminate for a tax event.
Continued on next page

GMRA. Paragraph 10(n)

171 
GMRA, Paragraph 11(c)
175 

GMSLA, Paragraph 11.8

172 
GMRA, Paragraph 10(d)
176 

ISDA Master Agreement, Section 6(f)

173 
GMSLA, Paragraphs 12.1-12.3
177 

GMRA, Paragraph 6(b)

174 

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Continued from previous page

With respect to payments other than in

respect of income, these provisions are
broadly speaking similar to those set out
in the GMRA and GMSLA, and they would
not change for the purpose of the SFT
schedule provisions.
With respect to payments of income/
distributions, no express provision is
made in the 1995 CSA with respect to
distributions being received net rather
than gross by the transferee. However, the
transferee is only required to pay to the
transferor what it receives. Consequently,
specific provisions for this may need to
be built into the SFT schedule provisions,
and the choice between the approach
taken in the GMRA and that taken in the
GMSLA would also be built in.

7. Boilerplate Provisions
Notices Notices or communications may be sent Notices or communications may be sent The ISDA Master Agreement provisions
by post, by fax or electronically under the by post, by fax or electronically under the regarding notices182 largely mirror those in
GMRA178. Delivery rules vary depending GMSLA. Delivery rules vary depending on the GMRA and GMSLA, although the ISDA
on the means used, but broadly involve the means used, but broadly involve the Master Agreement also provides for the
the notice’s arrival within the receiver’s notice’s arrival within the receiver’s sphere ability to send notices by telex183.
sphere of control179, except where this is of control, except where this is not on a This would not be changed in the SFT
not on a business day180. business day181. schedule provisions.

No waivers The GMRA provides that no express or The GMSLA similarly provides that no The ISDA Master Agreement also does not
implied waiver of any event of default by failure or delay by a party to exercise a permit the failure, delay or partial exercise
either party constitutes a waiver of any right or power will operate as a waiver. of a right to operate as a waiver in respect
other event of default, and no exercise of Again, a partial exercise of any right does of that right or others186.
any remedy will constitute a waiver of a not preclude any other or further exercise This would not be changed in the SFT
party’s right to exercise another. Failure to of that right or another right185. schedule provisions.
provide notice will not constitute a right to
do so at a later date184.

Governing law and The GMRA is governed by English law The GMSLA is also governed by English By contrast with the GMRA and GMSLA,
jurisdiction and requires parties to submit to the law188 and the parties must submit to parties are able to select via the schedule
exclusive jurisdiction of the English the exclusive jurisdiction of the English which law the ISDA Master Agreement is
courts (including in respect of any non- courts (including in respect of any non- governed by190: either English Law or New
contractual obligations arising out of the contractual obligations arising out of the York Law191. The election in the schedule
agreement)187. agreement)189. then affects the courts that must be used
to institute proceedings in192.
Contrary to the GMRA and GMSLA, the
ISDA provides for parties to submit to the
non-exclusive jurisdiction of either the
New York or English courts193. Further
options are catered for in the 2018 ISDA
Choice of Law and Governing Law Guide.
This would not be changed in the SFT
schedule provisions. However, the SFT
schedule provisions would be made
compatible with the French and Irish law
governed ISDA Master Agreements.

GMRA, Paragraph 14(a)-(b)

178 
ISDA Master Agreement, Section 9(f)
186 

GMRA, Paragraph 14(b)

179 
GMRA, Paragraph 17
187 

GMRA, Paragraph 14(b)

180 
GMSLA, Paragraph 23.1
188 

GMSLA, Paragraph 20.1

181 
GMSLA, Paragraph 23.2-3
189 

ISDA Master Agreement, Section 12(a)

182 
ISDA Master, Section 13(a)
190 

ISDA Master Agreement, Section 12(a)(ii)

183 
ISDA Master, Schedule, Part 4(h)
191 

GMRA, Paragraph 18
184 
ISDA Master, Section 13(b)
192 

GMSLA, Paragraph 22
185 
ISDA Master, Section 13(b)
193 

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 Whitepaper: Collaboration and Standardization Opportunities in Derivatives and SFT Markets

Provision GMRA GMSLA ISDA Master Agreement/

ISDA CSA
Recording Parties agree that each may electronically Parties agree that each may electronically In the ISDA Master Agreement, parties
record all telephone conversations record all telephone conversations may elect to include a provision to the
between them194. between them195. same effect as the GMRA and GMSLA via
the schedule196.
This would not be changed in the SFT
schedule provisions.

GMRA, Paragraph 20
194 
ISDA Master Agreement, Schedule, Part 4(n)
196 

GMSLA, Paragraph 2
195 

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 Whitepaper: Collaboration and Standardization Opportunities in Derivatives and SFT Markets

ABOUT ISDA
Since 1985, ISDA has worked to make the global derivatives addition to market participants, members also include key
markets safer and more efficient. Today, ISDA has over 925 components of the derivatives market infrastructure, such as
member institutions from 75 countries. These members exchanges, intermediaries, clearing houses and repositories,
comprise a broad range of derivatives market participants, as well as law firms, accounting firms and other service
including corporations, investment managers, government providers. Information about ISDA and its activities is
and supranational entities, insurance companies, energy and available on the Association’s website: www.isda.org.
commodities firms, and international and regional banks. In Follow us on Twitter, LinkedIn, Facebook and YouTube.

ISDA® is a registered trademark of the International Swaps and Derivatives Association, Inc. 50