The 1998 definitions of currencies and monetary options are published jointly by ISDA, EMTA and the Foreign Exchange Committee and are intended to confirm individual transactions governed by (i) the 1992 isda framework contracts; (ii) the International Foreign Exchange and Options Master Agreement (FEOMA), the International Foreign Exchange Master Agreement (“IFEMA”) and the International Currency Options Market Master Agreement (ICOM), respectively published by the Foreign Exchange Committee in collaboration with the British Bankers Association, the Canadian Committee for Data Exchange and the Committee on International Market Market Practices; and (iii) other similar agreements. Over-the-counter (OTC) derivatives are traded between two parties, not through an exchange or intermediary. The size of the OTC market means that risk managers must carefully monitor traders and ensure that approved transactions are properly managed. The agreement, published by the International Swaps and Derivatives Association (ISDA), outlines the terms applicable to a derivatives transaction between two parties, typically a derivatives dealer and a counterparty. The ISDA framework contract itself is standard, but it comes with an adapted schedule and sometimes a credit support schedule, both signed by both parties in a given transaction. The framework contract and the timetable shall determine the reasons why one of the parties may require the conclusion of covered transactions due to the occurrence of a termination event by the other party. Standard termination events include defaults or bankruptcy. Other termination events that can be added to the calendar include a credit degradation below a certain level. The most important thing to remember is that the isda framework contract is a clearing agreement and all transactions depend on each other.
Therefore, a defect below a transaction is considered a defect among all transactions. Section 1(c) describes the concept of the single agreement and is essential, as it is the basis of close-out netting. The intention is that when a failure event occurs, all transactions will be completed without exception. The concept of “close-out” prevents a liquidator from “pecking raisins”, that is, making payments for profitable transactions for his bankrupt client, and refusing to do so for an unprofitable one. . . .