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ISDA Credit Support Annex

USA

ISDA Credit Support Annex (CSA)

The 1994 Credit Support Annex (CSA) published by the International Swaps and Derivatives Association, Inc. (ISDA). This document governs collateral arrangements between the parties that have entered into derivative transactions under an ISDA Master Agreement.

The CSA is an annex to the ISDA Schedule, which, with the CSA, is incorporated into, supplements and forms a part of the ISDA Master Agreement. The first 12 paragraphs of the CSA are standard, pre-printed boilerplate provisions that are not altered on their face. Modifications to these provisions, as well as additional provisions that the parties wish to add, if any, are specified in paragraph 13 of the CSA, which the parties draft, usually based on a standard CSA paragraph 13 template published by ISDA. In addition to specifying modifications to paragraphs one through 12, paragraph 13 typically outlines the types of collateral that the parties agree are eligible for posting (eligible collateral) as well as minimum collateral transfer amounts (MTA) and certain thresholds, if any, of exposure of one party to the other above which collateral must be posted.

Like the ISDA Master and Schedule, the CSA applies to all transactions entered into under a particular ISDA Master. If there are multiple transactions entered into under a particular ISDA Master and the parties have executed a related CSA, the parties' positions on all of the transactions are netted to arrive at an aggregate trading position. The parties then use that position to determine whether or not collateral must be transferred from one party to the other (for example, if one party's position has improved in the aggregate, it may be entitled to the return of some or all of the collateral that it has posted with its counterparty and/or it may be entitled to receive collateral from its counterparty). Parties typically mark to market their trading positions as well as the value of posted collateral on a daily basis to determine their relative exposure and whether or not collateral must be transferred between them. The CSA contains dispute-resolution mechanisms in the event the parties disagree on these values. Collateral is often transferred between the parties on a daily basis, though sometimes less frequently.