Research On Legal Problem Of ISDA Credit Support Arrangement

The international financial derivatives has unique advantages, achieves the redistributionof benefits and risks among market traders, and can effectively manage and prevent risks, butalso has its own high-risk that can not be avoided.How to control and eliminate the risk ofOTC derivatives transactions is particularly important. The international derivatives tradingindustry’s most authoritative and influential global organization--the International Swaps andDerivatives Association (ISDA) released a series of standardized text of the agreement "ISDAfile group", such as ISDA Master Agreement, ISDA credit Support Document. ISDA creditsupport arrangement as the given security arrangement under ISDA Master Agreement, and itis closely linked to the ISDA Master Agreement, is a self-contained system, as a main meansof eliminating OTC credit risk, in practice, it has been widely used to become an industrypractice. But the ISDA Credit Support arrangement is developed in the derivatives marketpractice, there are more innovative and breakthrough of the traditional legal system ofguarantees, there are some incompatibilities with the traditional civil law concepts, rules, etc.And associated with a country’s bankruptcy law, It can happen the desired effect depends onwhether the system under the relevant law field effectively and can be enforced. This thesisdiscusses the rules of ISDA Credit Support arrangement as well as its effectiveness andenforceability under New York law and European Union Law,In order to build credit supportarrangements in China’s OTC derivatives trading.This thesis includes four chapters. The first chapter is an overview of internationalfinancial derivative transaction and ISDA credit support arrangement, including the conceptand characteristics of international financial derivative transactions. The introduction of ISDA,ISDA file group. The concept and characteristics of ISDA credit support arrangement, ISDAcredit support arrangement can be divided into two type: security interest approach creditsupport arrangement and title transfer approach credit support arrangement. the introductionof relevant concepts in this chapter can be lay the theoretical foundation for the followinganalysis.The second chapter analyzes the basic legal problems of security interest approach creditsupport arrangement. Represented by ISDA master agreement attachment NYCSA, analysisthe subject qualification of creating security interest approach credit support arrangement, theproblem of establishment cash deposit guarantee interests, then discusses the validity of both sides of guarantee’s rights of credit support, the implement conditions and ways of thesecurity interest approach credit support arrangement and when one party involved inbankruptcy and the compatibility of bankruptcy legal system. Comparative study its validityand enforceability under the U.S. law and the European Union Law.The third chapter analyzes the basic legal problems of title transfer approach creditsupport arrangement Represented by ISDA master agreement attachment ECSA, mainlyanalyzes the nature and effectiveness issues of title transfer approach credit supportarrangement, comparative study of the nature and effectiveness issues of it in the law ofUnited States and the European Union Uniform Law.The fourth chapter is trying to build a system of credit support arrangement for financialderivative transactions, including the status of the relevant financial derivative transaction,the validity of ISDA credit support arrangements under the existing legal system in ourcountry.The main effect for the parties to choose the applicable law and jurisdiction, thecompatibility with the relevant provisions of the "Bankruptcy Law "and ISDA credit supportarrangement.and the restriction of China ’s traditional security law theory to ISDA creditsupport arrangement.the specification of Our current foreign exchange management system toISDA credit support arrangement and so on. Then discussion on the necessity and feasibilityof the credit arrangement of the trading of financial derivatives, put forward the idea of thelegislative model of financial derivatives transaction.