The ISDA Master Agreement, published by the International Swaps and Derivatives Association, is the most widely used master service agreement for OTC derivatives trading internationally. It is part of a documentary framework designed to enable comprehensive and flexible documentation of OTC derivatives. The framework consists of a framework contract, a timetable, confirmations, definition brochures and credit support documentation. BSFP and the counterparty have agreed to enter into this agreement instead of negotiating a timetable for the 1992 Isda Framework Form (Multicurrency – Cross Border) (the “ISDA Form Framework Contract”). This applies only to the 1992 Framework Agreement. The 2002 Framework Agreement abolished the first and second methods. In practice, the first method was very rarely chosen, as its use required the financial institutions concerned to report their gross and non-net risk under the framework agreement. The 2002 framework agreement also replaced the distinction between market listing and loss with a single concept, the “close-out amount”. This is determined in relation to each transaction that has been concluded and is, overall, the profit or loss that would result from the conclusion of an equivalent transaction at the time of early termination. The sum of the amounts in the financial statements and unpaid amounts is called the “early cancellation amount”. This is the net amount to be paid from one party to another in respect of completed transactions. In 1987, ISDA prepared three documents: (i) a standard form framework contract for interest rate swaps in United States dollars; (ii) a standard framework contract for interest rate and currency swaps denominated in several currencies (collectively referred to as the `1987 ISDA framework contract`); and (iii) definitions of interest rates and currencies. The framework contract is quite long and the negotiation process can be laborious, but once a framework contract is signed, the documentation of future transactions between the parties will be reduced to a brief confirmation of the essential terms of the transaction.
The 1990s saw a large production of documents by ISDA, including (i) a revised version of the swap code, known as the 1991 isDA definitions, which were later designed and replaced by the 2000 ISDA definitions; (ii) a revision of the 1987 Framework Agreement which led to the 1992 Framework Agreement; (iii) the 1992 Framework Contract User Manual, drawn up in 1993, which details each part of the 1992 Framework Contract; (iv) the definitions of commodity derivatives developed in 1993 and supplemented in 2000; and (v) the annex containing safety documentation, which was completed in 1994, followed by its user manual in 1995. . . .