Joe has asked that I forward this to the full group, as he was unable to
receive the original email with addressees.


From: Joseph Carrico [Joseph.Carrico@ib.bankgesellschaft.de]
To:	Schuyler Henderson
Re:	Response to your remarks of 7 September.


Dear Schuyler,

I would like respond to your mail concerning the ISDA Protocol.

Concerning Annex 3:-

I concur with your observations that in many lending and repo master
agreements there are events of default that are of another nature than
the events which are Events of Default under the ISDA.  These events
include, for example, being suspended from an exchange (which may be
relevant as an event of default with respect to securities in a specific
market, but was very likely not foreseen by the parties to the ISDA as
an Event of Default under the broader product coverage of the ISDA).

In addition, in the proposed ?5(a)(v)(2) there is a similar cross
pollution issue with respect to delivery failures.  When reviewing the
many master agreements where under physical delivery of shares or bonds
are foreseen there is little consistency with respect to the treatment
of delivery failures.  ISDA documented products have the possibility to
be covered by Failure to Deliver provisions, some agreements provide for
a mini-default/close-out, some try to bring in a cash element as a test
for proving a counterparty's liquidity (often a termination event
approach) ,  and others offer the option of a mini-close-out or a total
default, and yet other documents offer only a total default.  Given the
regularity these failures occur in the market,  I have drafted a version
of Annex 3, which also addresses this issue by building into the
provisions a procedure (a shortened version of the Failure to Deliver
provision used in ISDA's 1997 Government Bond Option Definitions)
whereby the counterparty is given the opportunity to prove its
liquidity.  I attach the annex I have prepared addressing these issues.

Annex 8:-

Concerning Early Termination Date and Section 6, you raise very
interesting issues, which I confess I had not focused on before in that
light.  I agree with your analysis that with the effective date of the
notice being the true termination date of the Transactions with the
Early Termination Date being more a valuation date.  My view is that
this is an opportune time to discuss the issues you raise in more detail
given the broad scope of the up coming Master Agreement Protocol.

I attach the alternative proposal for Annex 3.  Would you please forward
this response to the broader documentation committee, as I am unable to
do so from my computer because I did not receive the original e-mail due
to the length of the header on the e-mail.

Regards,

Joseph Carrico




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 - BD-#398110-v1-ISDA_1992_Master_Agreements_-_Annex_3.DOC