Diane Genova

Managing Director and Associate General Counsel

August 6, 2002

Overview of the Architecture of the 1992 ISDA Master Agreements

International Swaps and Derivatives Association, Inc.

Fundamental of ISDA Documentation

Hotel Inter-Continental

Sao Paulo, Brazil

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Topics

Role of ISDA in Standardized Documentation

Importance of Standardized Documents in the Marketplace

Architecture of the 1992 ISDA Master Agreements

User’s Guides

Conflict of Law Issues

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Role of ISDA

ISDA has played a leading role since 1985

Initial standardization efforts

– 1985 Code of Swaps

– 1987 Interest Rate and Currency Exchange Agreement

Publication of ISDA Master Agreements in 1992

– Broader product coverage

– Greater netting benefits

Publication of standard collateral documentation

– Credit Support Annexes

– 2001 Margin Provisions

Ongoing effort - 2002 ISDA Master Agreement

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Importance of Standardized Documents

ISDA documentation has achieved wide degree of market acceptance - many benefits

Documentation efficiency

Elimination of basis risk

Facilitates netting

Promotes liquidity

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ISDA Master Agreement Architecture

ISDA Master

– Not product specific

– Not party specific

Schedule

– Not product specific

– Party specific

• Credit

• Counterparty specific legal risks

• Credit Support Annex

Definitions

– Product specific

– Not party specific

– Contains definitions of floating rates/prices, how to calculate payments, etc.

Confirmation

– Details of an actual transaction (amounts, dates, rates)

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ISDA Agreement Structure 2002

1992 Master Agreement (Multicurrency-Cross Border)

Governs the legal and credit relationship of the parties

Includes representations, events of default/termination events and covenants

Incorporates Confirmations Schedule used to make changes to

standard provisions

Confirmations (short form)

Incorporate Definitions Specify economic terms of each

transaction Include Transaction-specific

modifications

Credit Support Documents: Offering protection against credit risk

2001 ISDA Margin Supplement (incorporating 2001 ISDA Margin Provisions)

• 1995 Credit Support Annex (Transfer – English Law)

• 1994 Credit Support Annex

(New York Law)

1995 Credit Support Deed (Security Interest – English Law)

1996 Credit Support Annex

(Japanese Law)

Protocols: amending Master Agreement

• 2001 Credit Support Protocol

• 2000 EMU Protocol (Greece)

• 1998 EMU Protocol

Confirmations (long form)

Definitions: for use in documenting Transactions

2000 Definitions (replace the 1991 Definitions (as amended by the 1998 Supplement))

1999 Credit Derivatives Definitions (plus various Supplements)

1998 Euro Definitions

1998 FX and Currency Option Definitions (plus revised Annex A)

1997 Bullion Definitions

1997 Government Bond Option Definitions

1996 Equity Derivatives Definitions

1993 Commodity Derivatives Definitions (as amended by the 2000 Supplement)

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ISDA User’s Guides

Purpose of User’s Guides is to:

– Explain provisions of the Agreemetn

– Set forth additional provisions

– Provide some basic legal guidance

User’s Guide to the 1992 ISDA Master Agreements

User’s Guide to the 1994 ISDA Credit Support Annex

User’s Guide to the 1995 ISDA Credit Support Annex (Security Interest - Japanese Law)

User’s Guide to the ISDA Credit Support Documents under English Law

User’s Guide to the 1998 FX and Currency Option Definitions

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Conflict of Law Issues

ISDA Master designed to be governed by English or NY Law

Governing law determinative on some issues

– Mechanics of contract formation

– Enforceability of damages provisions

Governing law irrelevant on other issues

– Bankruptcy/Insolvency

– Power and Authority

– Tax

– Perfection of securities interests in collateral