Template:M summ EUA Annex (d)(i)(4)(D): Difference between revisions
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[[(d)(i)(4) - Emissions Annex Provision|Some]] rather magical (in the sense of being quite impenetrable) thinking from {{icds}} here, in the name of seeking a long-stop to a {{euaprov|Settlement Disruption Event}}. Since there is this {{euaprov|Reconciliation Deadline}} concept — 30 April each year — by which time, certain EUAs have to be surrendered, an ongoing settlement disruption can be a rather fraught thing. Emissions Allowances can suddenly, by government fiat, become worthless in a way that most other financial instruments cannot. | |||
Some rather magical (in the sense of quite impenetrable) thinking from {{icds}} here, in the name of seeking a long-stop to a {{euaprov|Settlement Disruption Event}}. Since there is this {{euaprov|Reconciliation Deadline}} concept — 30 April each year — by which time certain EUAs have to be surrendered, an ongoing settlement disruption can be a rather fraught thing. Emissions Allowances can suddenly, by government fiat, become worthless in a way that most other financial instruments cannot. | |||
What happens? Well, after 9 delivery Business Days (or such shorter period as may be dictated by {{euaprov|Reconciliation Deadline}}s) the disruption is deemed to be an Illegality — I know, I know: it isn’t | What happens? Well, after 9 delivery Business Days (or such shorter period as may be dictated by {{euaprov|Reconciliation Deadline}}s) the disruption is deemed to be an {{isdaprov|Illegality}} — I know, I know: it isn’t even ''close'' to being an Illegality<ref>In a nutshell, a real ISDA {{isdaprov|Illegality}} happens where, “for reasons beyond the {{euaprov|Affected Party}}’s control, (not counting a lack of authorisation), it would be illegal in any relevant jurisdiction to comply with any material term of a {{isdaprov|Transaction}}”; {{euaprov|Settlement Disruption}} is most certainly not that.</ref> — and depending on whether Payment on Termination for Settlement Disruption applies, the parties either have to perform their obligations after all — odd, since the Settlement Disruption Event is ongoing, and Q.E.D. they can’t — or the transaction is basically voided ab initio and both parties walk away, refunding any [[put]] or [[call]] premiums they may previously have received. | ||
Latest revision as of 15:44, 15 April 2024
Some rather magical (in the sense of being quite impenetrable) thinking from ISDA’s crack drafting squad™ here, in the name of seeking a long-stop to a Settlement Disruption Event. Since there is this Reconciliation Deadline concept — 30 April each year — by which time, certain EUAs have to be surrendered, an ongoing settlement disruption can be a rather fraught thing. Emissions Allowances can suddenly, by government fiat, become worthless in a way that most other financial instruments cannot.
What happens? Well, after 9 delivery Business Days (or such shorter period as may be dictated by Reconciliation Deadlines) the disruption is deemed to be an Illegality — I know, I know: it isn’t even close to being an Illegality[1] — and depending on whether Payment on Termination for Settlement Disruption applies, the parties either have to perform their obligations after all — odd, since the Settlement Disruption Event is ongoing, and Q.E.D. they can’t — or the transaction is basically voided ab initio and both parties walk away, refunding any put or call premiums they may previously have received.
- ↑ In a nutshell, a real ISDA Illegality happens where, “for reasons beyond the Affected Party’s control, (not counting a lack of authorisation), it would be illegal in any relevant jurisdiction to comply with any material term of a Transaction”; Settlement Disruption is most certainly not that.