Template:Nutshell Equity Derivatives 11.1: Difference between revisions
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{{eqderivprov|11.1}}. '''{{prov2|eq|Adjustments to Indices (Adjustments)|Adjustments to Indices}}'''. <br> | |||
{{eqderivprov|11.1(a)}} | {{eqderivprov|11.1(a)}} '''{{eqderivprov|Successor Indices}}'''. The {{eqderivprov|Calculation Agent}} may deem an {{eqderivprov|Index}} calculated by a successor sponsor to the {{eqderivprov|Index Sponsor}}, or a “'''{{eqderivprov|Successor Index}}'''” that replaces the {{eqderivprov|Index}} and uses a substantially similar formula and calculation method, to ''be'' the {{eqderivprov|Index}}. <br> | ||
{{eqderivprov|11.1(b)}} | {{eqderivprov|11.1(b)}} '''{{eqderivprov|Index Adjustment Event}}s''': If before any {{eqderivprov|Valuation Date}} the {{eqderivprov|Index Sponsor}} announces a material change to the calculation method of, or materially modifies the {{eqderivprov|Index}} in any way not contemplated in its formula or method (an “'''{{eqderivprov|Index Modification}}'''”), permanently cancels the {{eqderivprov|Index}} where no {{eqderivprov|Successor Index}} exists (an “'''{{eqderivprov|Index Cancellation}}'''”) or fails to announce a relevant {{eqderivprov|Index}} (an “'''{{eqderivprov|Index Disruption}}'''” (each of these events an “'''{{eqderivprov|Index Adjustment Event}}'''”), then: <br> | ||
:(A) if “'''[[Calculation Agent Adjustment (Adjustment Events) - Equity Derivatives Provision|Calculation Agent Adjustment]]'''” | :(A) if “'''[[Calculation Agent Adjustment (Adjustment Events) - Equity Derivatives Provision|Calculation Agent Adjustment]]'''” applies, then the {{eqderivprov|Calculation Agent}} must determine whether the {{eqderivprov|Index Adjustment Event}} materially affects the {{eqderivprov|Index Transaction}} and, if it does, must calculate the any necessary price, using the {{eqderivprov|Index}} level as at that {{eqderivprov|Valuation Date}} it determines using the {{eqderivprov|Index}} calculation method last in effect before the {{eqderivprov|Index Adjustment Event}}, using the securities that comprised that {{eqderivprov|Index}} at that time; <br> | ||
:(B) if “'''[[Negotiated Close-out (Adjustment Events) - Equity Derivatives Provision|Negotiated Close-out]]'''” | :(B) if “'''[[Negotiated Close-out (Adjustment Events) - Equity Derivatives Provision|Negotiated Close-out]]'''” applies then the parties may terminate the {{eqderivprov|Transaction}} on mutually acceptable terms and if they do not it will continue on the terms and conditions and using formulas and calculation methods in effect as of the time of any necessary calculations; or <br> | ||
:(C) if “'''[[Cancellation and Payment (Adjustment Events) - Equity Derivatives Provision|Cancellation and Payment]]'''” | :(C) if “'''[[Cancellation and Payment (Adjustment Events) - Equity Derivatives Provision|Cancellation and Payment]]'''” applies then following an {{eqderivprov|Index Adjustment Event}} the {{eqderivprov|Transaction}} cancelled and valued using the {{eqderivprov|Index}} calculation method in effect immediately before the {{eqderivprov|Index Adjustment Event}} in question, as follows:<br> | ||
::(1) | ::(1) for an {{eqderivprov|Index Disruption}}, the {{eqderivprov|Transaction}} will be cancelled on the {{eqderivprov|Valuation Date}}, <br> | ||
::(2) | ::(2) for an {{eqderivprov|Index Cancellation}}, the {{eqderivprov|Transaction}} will be cancelled on the {{eqderivprov|Exchange Business Day}} before the {{eqderivprov|Index Cancellation}} is effective (or the date the {{eqderivprov|Index Sponsor}} announces it, if later) and <br> | ||
::(3) | ::(3) following announcement of an {{eqderivprov|Index Modification}}, either party may elect, on two {{eqderivprov|Scheduled Trading Days}}’ notice (or less, so that termination occurs by the {{eqderivprov|Index Modification}} date), to cancel the {{eqderivprov|Transaction}} by the {{eqderivprov|Scheduled Trading Day}} before the {{eqderivprov|Index Modification}} becomes effective and | ||
:::(X) for {{eqderivprov|Option Transaction}}s, {{eqderivprov|Seller}} will pay to {{eqderivprov|Buyer}} the Section {{eqderivprov|12.7(b)(ii)}} amount and | |||
:::(Y) for [[Share Swap Transaction - Equity Derivatives Provision|Swap]] and [[Forward Transaction - Equity Derivatives Provision|Forward Transaction]]s, one party will pay the other the Section {{eqderivprov|12.7(c)}} amount. <br> | |||
Latest revision as of 12:20, 13 May 2022
11.1. Adjustments to Indices.
11.1(a) Successor Indices. The Calculation Agent may deem an Index calculated by a successor sponsor to the Index Sponsor, or a “Successor Index” that replaces the Index and uses a substantially similar formula and calculation method, to be the Index.
11.1(b) Index Adjustment Events: If before any Valuation Date the Index Sponsor announces a material change to the calculation method of, or materially modifies the Index in any way not contemplated in its formula or method (an “Index Modification”), permanently cancels the Index where no Successor Index exists (an “Index Cancellation”) or fails to announce a relevant Index (an “Index Disruption” (each of these events an “Index Adjustment Event”), then:
- (A) if “Calculation Agent Adjustment” applies, then the Calculation Agent must determine whether the Index Adjustment Event materially affects the Index Transaction and, if it does, must calculate the any necessary price, using the Index level as at that Valuation Date it determines using the Index calculation method last in effect before the Index Adjustment Event, using the securities that comprised that Index at that time;
- (B) if “Negotiated Close-out” applies then the parties may terminate the Transaction on mutually acceptable terms and if they do not it will continue on the terms and conditions and using formulas and calculation methods in effect as of the time of any necessary calculations; or
- (C) if “Cancellation and Payment” applies then following an Index Adjustment Event the Transaction cancelled and valued using the Index calculation method in effect immediately before the Index Adjustment Event in question, as follows:
- (1) for an Index Disruption, the Transaction will be cancelled on the Valuation Date,
- (2) for an Index Cancellation, the Transaction will be cancelled on the Exchange Business Day before the Index Cancellation is effective (or the date the Index Sponsor announces it, if later) and
- (3) following announcement of an Index Modification, either party may elect, on two Scheduled Trading Days’ notice (or less, so that termination occurs by the Index Modification date), to cancel the Transaction by the Scheduled Trading Day before the Index Modification becomes effective and
- (X) for Option Transactions, Seller will pay to Buyer the Section 12.7(b)(ii) amount and
- (Y) for Swap and Forward Transactions, one party will pay the other the Section 12.7(c) amount.
- (1) for an Index Disruption, the Transaction will be cancelled on the Valuation Date,