The International Swaps and Derivatives Association (ISDA) is an organization for market participants who deal in over-the-counter derivatives contracts. This organization created a standardized contract that defines the terms and parameters for entering into a derivative instrument. The contract is quite extensive, with a Master Agreement that typically remains static and a Schedule to the Master that makes the document unique to the trading parties and specifies any additional constraints on the trade or its participants. In our experience, most clients simply sign the contract presented to them by their bank counterparty without reviewing or negotiating any of the terms within the Schedule to the ISDA Master agreement. As a swap advisor, Cardea Partners can clarify and negotiate this document for our clients.
Given the demise of some major swap dealers during the financial crisis, it is imperative that hedge end-users understand how the ISDA contract affects them in the event of default by either party. We have the experience to decipher this expansive document and explain the implications of the clauses. Our approach is to balance the terms, which typically favors of the derivative dealer, providing more flexibility for our clients to assign or transfer an interest rate swap or improve the terms of collateral. The position of power for clients and borrowers is prior to execution of a trade, which also when Cardea Partners can provide great value in terms of documentation and pricing support.