View source for Template:M summ Equity Derivatives 10

{{dividends generally}}
{{capsule equity derivative dividend payments}}
{{dividend timing}}
{{dividend interest accruals}}
{{dividends on index transactions}}
==Clause-by-clause==
===Section {{eqderivprov|10.1(a)}} {{eqderivprov|Record Amount}}===
Referencing the {{eqderivprov|Ex Amount}} or the {{eqderivprov|Record Amount}} for a manufactured distribution under an [[equity derivative]] doesn’t make much sense. Referencing the {{eqderivprov|Paid Amount}} ''would'', had {{icds}} drafted it properly. The [[JC]] has a proposed [[Paid Amount (Dividend Amount) - Equity Derivatives Provision|fix]].

===Section {{eqderivprov|10.1(b)}} {{eqderivprov|Ex Amount}}===
A key part of the Kafkaesque labyrinth you must navigate to work out how much, and when, your {{eqderivprov|Dividend Amount}} (or, if you’re looking at paragraph {{eqderivprov|10.7(b)}}, {{eqderivprov|Extraordinary Dividend}}) will be paid. 

Spoiler: referencing the {{eqderivprov|Ex Amount}} or the {{eqderivprov|Record Amount}} for a manufactured distribution under an [[equity derivative]] doesn’t make much sense. Referencing the {{eqderivprov|Paid Amount}} ''would'', had {{icds}} drafted it properly. The [[JC]] has a proposed [[Paid Amount (Dividend Amount) - Equity Derivatives Provision|fix]].

Note how [[coronavirus|an unexpected cessation of all non-essential economic activity in the western world]] has threatened to reveal embedded [[snafu]] drafting in the Equity Derivatives Definitions. See the “For completists” section below for more.

=== Section {{eqderivprov|10.1(c)}} {{eqderivprov|Paid Amount}}===
The {{eqderivprov|Paid Amount}} problem. So we have ''two'' problems: what to do if the [[record date]] for a {{eqderivprov|Dividend Amount}} falls ''before'' the [[trade date]] for a {{eqderivprov|Transaction}}, and what to do if the [[dividend payment date]] falls ''after'' the {{eqderivprov|Transaction}} terminates. 

Neither of these contingencies, predictable though they seem to be, is addressed in the {{eqdefs}}. But help is at hand: the [[JC]] — errors and omissions excepted, all usual [[disclaimer]]s applying — humbly offers the following corrective for your [[Master Confirmation Agreement]]:

:“{{eqderivprov|Paid Amount}}” will apply, provided that:
::(a) where the {{eqderivprov|Share}} was trading “[[ex-dividend]]” as of the {{isdadefsprov|Effective Date}}, the {{eqderivprov|Paid Amount}} will be zero; and
::(b) where the {{isdaprov|Transaction}} terminates ''after'' the {{eqderivprov|Share}} commenced trading “[[ex-dividend]]” but ''before'' the scheduled {{eqderivprov|Dividend Payment Date}}, the {{eqderivprov|Equity Amount Payer}} will pay any {{eqderivprov|Paid Amount}} one [[settlement cycle]] following payment of the corresponding dividend by the {{eqderivprov|Issuer}} to holders of record of the {{eqderivprov|Share}}.

===Section {{eqderivprov|10.2}} {{eqderivprov|Dividend Payment Date}}===
Just part of the monster truck motorway pile-up that was {{icds}}s’ attempt to provide for manufactured dividends on equity derivatives. Total disaster. See {{eqderivprov|Dividend Amount}} for the full enormity of the situation.

The only relevance of the {{eqderivprov|Cash Settlement Payment Date}} or {{eqderivprov|Settlement Date}} is that the former relates to [[Cash|money]] payments and therefore cash dividends, the latter to [[physical delivery]] of [[securities]], (i.e. scrip [[Dividend - Equity Derivatives Provision|dividend]]s), which are more fraught with disruptions. 

So your cash payments will usually get paid on the intended {{eqderivprov|Currency Business Day}}; [[scrip|scrip dividend]]s might not get to you for a few days if the market is a bit salty.
===Section {{eqderivprov|10.3}} {{eqderivprov|Dividend Period}}===
Somewhat muffs what you do with a {{eqderivprov|Paid Amount}} dividend that became due (i.e., had a [[record date]] before the termination date, but is not paid until after the termination date.

===Section {{eqderivprov|10.4}} {{eqderivprov|Reinvestment of Dividends}}===
This adds the value of declared ''and paid'' dividends to the value of the {{eqderivprov|Equity Notional Amount}}. It references the {{eqderivprov|Cash Settlement Payment Date}} which assumes a [[cash dividend]] and not a [[scrip dividend]]) because if you aren’t actually settling the dividend at all, you don’t have to worry about there being some kind of disruption, which worry is implied in the definition of Settlement Amount - being the date you get physical settlement of a scrip dividend — but not in the Cash Settlement Payment Amount, which is the date for a cash dividend. I don't think I explained that very well. But hopefully you can see what I mean. Sort of.

===Section {{eqderivprov|10.5}} {{eqderivprov|Dividend Payment Obligations Relating to Physically-settled Option Transactions}}===
There are some provisions of the 2002 ISDA Equity Derivatives Definitions that will cause extended, heated negotiation and a degree of enmity between even mild-mannered negotiators. This is not one of them.

=== Section {{eqderivprov|10.6}} {{eqderivprov|Extraordinary Dividend}} ===
[[Extraordinary Dividend - Equity Derivatives Provision|You]] would be forgiven for thinking this definition a little circular, especially if you haven’t specified what an {{eqderivprov|Extraordinary Dividend}} will be in the {{isdaprov|Confirmation}}. This is because — we venture — {{icds}} felt it was all a bit hard. 

“Because,” said they, “of the difficulties of determining in advance in any formulaic way what would constitute an {{eqderivprov|Extraordinary Dividend}}, the details of this are left to parties to state in their {{isdaprov|Confirmation}}s.”

Of course, the point about an {{eqderivprov|Extraordinary Dividend}} is that it is ''extraordinary''. Out of the ordinary; off the beaten track; beyond the mortal comprehension, and powers of prediction, not just of the sainted ISDA drafting committee, but of those poor saps, too, grinding out your equity derivative trade confirms in some mice-invested operations depot in suburban Almaty. How are ''they'' supposed to know what an {{eqderivprov|Extraordinary Dividend}} is?

But look on the bright side: “{{eqderivprov|Dividend}}” is not defined in the {{eqderivdefs}} ''at all!''<ref>Try “{{eqderivprov|Dividend Amount}}”, which refers to a “gross cash dividend” without further elaborating on what that might be.</ref>

Anyway, the definition boils down, as best as I can fathom, to this:

“An {{eqderivprov|Extraordinary Dividend}} is whatever the {{eqderivprov|Calculation Agent}} jolly well says it is.”

Which, in its way, is fine, especially if you happen to be acting for the {{eqderivprov|Calculation Agent}}, but if you ''are'' the {{eqderivprov|Calculation Agent}} and the question before you is “is this really weird thing that’s just happened to the voting stock of some obscure trucking company in Panama an {{eqderivprov|Extraordinary Dividend}} or not?” you might feel anchored a little high up the beach as the tide goes out.

Look, I don’t make the rules, folks.

===Section {{eqderivprov|10.7}} {{eqderivprov|Excess Dividend Amount}} ===
See paragraph {{eqderivprov|10.1(b)}} {{eqderivprov|Ex Amount}}, which applies to normal, unremarkable dividends and {{eqderivprov|10.7(b)}} {{eqderivprov|Ex Amount}} which applies to {{eqderivprov|Extraordinary Dividend}}s (or you could really go to town and ''{{compare|39921|39920}}'' them).

Most of the time you’ll be using the normal one under paragraph {{eqderivprov|10.1(b)}}, but (except for the reference to “gross cash dividend” on one hand and “extraordinary dividend” on the other.