In this paper, we present an informal introduction to Logical English (LE) and illustrate its use to standardise the legal wording of the Automatic Early Termination (AET) clauses of International ...Swaps and Derivatives Association (ISDA) Agreements. LE can be viewed both as an alternative to conventional legal English for expressing legal documents, and as an alternative to conventional computer languages for automating legal documents. LE is a controlled natural language (CNL), which is designed both to be computer-executable and to be readable by English speakers without special training. The basic form of LE is syntactic sugar for logic programs, in which all sentences have the same standard form, either as rules of the form
conclusion if conditions
or as unconditional sentences of the form
conclusion.
However, LE extends normal logic programming by introducing features that are present in other computer languages and other logics. These features include typed variables signalled by common nouns, and existentially quantified variables in the
conclusions
of sentences signalled by indefinite articles. Although LE translates naturally into a logic programming language such as Prolog or ASP, it can also serve as a neutral standard, which can be compiled into other lower-level computer languages.
Safe harbour' is shorthand for a bundle of privileges in insolvency which are typically afforded to financial institutions. They are remotely comparable to security interests as they provide a ...financial institution with a considerably better position in insolvency. The common rationale for such safe harbours is that they protect against systemic risk. This paper submits that the true argument for the existence of safe harbours is rather liquidity in the financial market. Safe harbour rules do away with a number of legal concepts, notably those attached to traditional security, and thereby allow for the exponentiation of liquidity. The law sanctions safe harbours as modern economies are dependent on these high levels of liquidity. To the extent that safe harbours accelerate contagion in times of crisis, which in principle is a valid argument, specific regulation is well suited to correct this situation. To repeal or significantly restrict the safe harbours would be counterproductive.
El acuerdo marco ISDA y su importante herramienta de mitigación de riesgo, conocida como Close-out netting, es un elemento de vital importancia para el mercado de derivados internacional, sin el cual ...no existiría en su dimensión y volumen actuales. Esta circunstancia implica que los reguladores alrededor del mundo se ven en la necesidad de ajustar su régimen de derecho privado y de insolvencia, para brindar certeza acerca de que este modelo de acuerdo sea ejecutable y válido ante el evento de insolvencia de una de las partes. Estos ajustes regulatorios son las “normas de puerto seguro”. Con todo, la forma y el diseño de estas normas, la mayoría de las veces dirigidas solo a cobijar al mercado financiero, pueden generar serias distorsiones y diferencias con el régimen de insolvencia general, rompiendo así el tradicional principio de igualdad entre acreedores (pari passu o par conditio creditorum) que es esencial a este tipo de procesos. Desde el punto de vista normativo, la ruptura de la igualdad entre acreedores en el proceso de insolvencia debe estar justificada por un valor o razón constitucionalmente atendible. El presente texto pretende hacer una lectura crítica de las ideologías o valores que inspiran tradicionalmente estas normas de puerto seguro, para mostrar que la mitigación de riesgo sistémico como razón que las inspira no es un argumento suficiente para justificar la ruptura de la igualdad entre acreedores
Close-out netting provisions are a relatively new addition to the financial legal framework. Their primary objective is to strengthen the regulation and manage the risk associated with ...over-the-counter derivatives. They have been adopted by the financial industry and used in financial transactions to assist in controlling and allocating financial risks. They are becoming an effective tool that provides an efficient process in calculating and settling on a net balance. However, they have been criticized for being unable to save some of the larger financial institution throughout the 2008 Global Financial Crisis. This paper examines how close-out netting provisions are applied under the UNIDROIT Principles which serves as the benchmark on how jurisdictions have incorporated them into national law. It examines the current approach taken by Australia, Indonesia, Malaysia and Singapore, stressing their importance in the increasing interconnected financial markets across Southeast Asia and Oceania. While this paper is limited in its scope only referring to the international framework and four national countries, the analysis undertaken can arguably be applied to other national and supranational legal systems. The paper challenges the fragmented approach to regulation of close-out netting provisions in a global setting. It highlights the divergent approaches currently adopted in defining, negotiating, drafting, interpreting and enforcing close-out netting provisions. It argues that nation states should adapt the UNIDROIT Principles in light of their national law and policy. It also presents a way forward in enforcing close-out netting provisions within contracts.
The purpose of this paper is to estimate the benefits from adopting close-out netting to decrease the exposure to counterparty risk across the world markets and to establish the additional benefits ...from central counterparties towards decreasing counterparty risk. The novelty of the approach is to estimate a figure for counterparty credit risk (CCR) grouping together most of the financial transactions that generate counterparty risk and to analyze the benefit of netting possibilities in reducing the overall risk exposure, using three different scenarios. In the first scenario, counterparty credit risk is calculated assuming that no close-out netting is possible across different contracts. The second scenario assumes bilateral negotiations and netting across contracts. The third scenario contemplates the existence of a
central counterparty as the center of transactions. Benefits from netting and central counterparty are assessed by comparing the risk exposure in each scenario. Results from the model show that netting provides a decrease in world counterparty risk of over $17 trillion. Netting is thus a powerful tool available in the world markets to manage counterparty risk while decreasing systemic risk, and as such policies to facilitate and standardize netting procedures across different jurisdictions should be encouraged. Moreover, results show that the use of central counterparties for settling the outstanding contracts would additionally decrease CCR by over $2 trillion.
Les législations concernant les marchés financiers régissent non seulement les marchés, mais également les acteurs, les produits ainsi que les activités dans les marchés. En utilisant ces outils ...juridiques indispensables, les législateurs des deux côtés de l'Atlantique visent, entre autres, à protéger les investisseurs dont la confiance est primordiale pour les marchés, d'une part, et à diminuer les risques systémiques dont le déclenchement pourrait survenir dans un contexte financier de plus en plus globalisé, d'autre part. En effet, après la crise financière globale de 2008, les risques systémiques ont attiré davantage l'attention législative. À partir desdits objectifs que les législateurs veulent atteindre, nous essayons de trouver et analyser les particularités des législations concernées, tant en France ou dans l'Union européenne qu'aux États-Unis, en passant par la comparaison des dispositions législatives ou des initiatives législatives à travers l'Atlantique, avec la considération de l'évolution législative respective. Nous apportons aussi nos réflexions sur les insuffisances ou les déficiences à l’égard de mesures ou d’efforts législatifs pris en compte par les législateurs transatlantiques en vue de réaliser ces objectifs. Face à une crise financière sans précédent à nos jours, et donc à l'exigence d'une réaction législative active, appropriée, opportune et raffinée, il nous semble qu’il est le temps pour les législateurs en France, dans l'Union et aux États-Unis d'approfondir leurs connaissances sur des produits financiers en innovation sans cesse, de mieux adapter leurs stratégies législatives aux développement des activités financières et des entités finiancières, et de renforcer leurs coopérations et coordinations en profondeur dans le domaine de réglementation et supervision financière, et enfin, de mieux réaliser leurs buts poursuivis.
The legislations concerning financial markets govern not only the markets, but also the participants, the products and the activities as well in the markets. By using these indispensable legal tools, the legislators of both sides of Atlantic aim at, among others, protecting the investors whose confidence is of top priority to the markets, on the one hand, and reducing the systemic risk which would occur in a more and more globalised financial context, on the other. Indeed, after the global financial crisis of 2008, systemic risk has drawn more legislative attention. From the abovementioned objectives which the legislators would like to achieve, we try to find and analyze the particularity of the legislation concerned, both in France or in the European Union and in the USA, by way of comparison of legislative dispositions or legislative initiatives across the Atlantic, with the consideration about their respective legislative evolution. We also give our reflections on the insufficiencies or the deficiencies with regard to the legislative measures or efforts taken by the transatlantic legislators to realize those objectives. Facing the actual and unprecedented financial crisis, and thus a requirement of dynamic, appropriate, timely and refined legislative reaction, it seems to us that it is the time for legislators in France, in the EU and in the USA to deepen their knowledge about financial products of non-stop innovation, to better adapt their legislative strategies to the development of financial activities and financial entities, to reinforce their cooperation and coordination in depth and in width in the field of financial regulation and supervision, and finally, to better fulfill their pursuing goals.
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