Insolvency Filing - Equity Derivatives Provision

2002 ISDA Equity Derivatives Definitions A Jolly Contrarian owner’s manual™ Resources and navigation Resources About the Equity Derivatives Definitions | (full wikitext) | (nutshell wikitext) | Equity v credit derivatives showdown Hot topics Synthetic Prime Brokerage Anatomy | The Triple Cocktail | Cancellation and Payment | Calculation Agent Resources About the Equity Derivatives Definitions | (full wikitext) | (nutshell wikitext) | Equity v credit derivatives showdown Hot topics Synthetic Prime Brokerage Anatomy | The Triple Cocktail | Cancellation and Payment | Calculation Agent TOC | 1 General Definitions | 2 Option Transactions | 3 Exercise of Options | 4 Forward Transactions | 5 Equity Swap Transactions | 6 Valuation | 7 Settlement | 8 Cash Settlement | 9 Physical Settlement | 10 Dividends | 11 Adjustments and Modifications | 12 Extraordinary Events · 12.8 Cancellation Amount · 12.9 Additional Disruption Events · 12.9 List of ADEs · 12.9(b) Consequences of ADEs | 13 Miscellaneous Index: Click ᐅ to expand: Equity Derivatives - Premium Synthetic Prime Brokerage Paragraph 12.9(a)(iv) in a Nutshell™ Use at your own risk, campers! 12.9(a)(iv) “Insolvency Filing” means that the Issuer commences or agrees to insolvency proceedings or a winding-up petition (or has one instituted against it by a regulator or insolvency administrator). Non-consensual insolvency action taken by creditors is not an Insolvency Filing; view template Full text of Paragraph 12.9(a)(iv) 12.9(a)(iv) “Insolvency Filing” means that the Issuer institutes or has instituted against it by a regulator, supervisor or any similar official with primary insolvency, rehabilitative or regulatory jurisdiction over it in the jurisdiction of its incorporation or organization or the jurisdiction of its head or home office, or it consents to a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation by it or such regulator, supervisor or similar official or it consents to such a petition, provided that proceedings instituted or petitions presented by creditors and not consented to by the Issuer shall not be deemed an Insolvency Filing; view template Tell me more Sign up for our newsletter — or just get in touch: for ½ a weekly 🍺 you get to consult JC. Ask about it here.

Content and comparisons

Section 12.9(a): The actual Additional Disruption Events

12.9(a)(i) Additional Disruption Event

12.9(a)(ii) Change in Law

12.9(a)(iii) Failure to Deliver

12.9(a)(iv) Insolvency Filing

12.9(a)(v) Hedging Disruption

12.9(a)(vi) Increased Cost of Hedging

12.9(a)(vii) Loss of Stock Borrow

12.9(a)(viii) Increased Cost of Stock Borrow

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Summary

One tends to disapply this and instead rely on the famous Triple Cocktail so somewhat academic, but if you are minded to include it, note that an Insolvency Filing is wider than “Insolvency” Section 12.6(a)(ii). Also it differs from Bankruptcy in the ISDA Master Agreement, in that it has no grace period and cannot be triggered by creditor petitions etc.

As with Change in Law, an Insolvency Filing allows either party to terminate the Transaction upon at least two Scheduled Trading Days’ notice, whereupon the Transaction will terminate and the Determining Party will determine the Cancellation Amount.

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General discussion

You may be forgiven for wondering what the difference is between “Insolvency”, being the normal Extraordinary Event from Section 12.6, and the Additional Disruption Event called “Insolvency Filing”.

It’s a good question that, we dare say, even ISDA’s crack drafting squad™ would struggle to capably answer, but the reality is that this people tend to disapply Insolvency Filing, as it is covered by other Additional Disruption Events so Insolvency is the important one.

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See also

• Insolvency under Section 12.6(a) of the 2002 ISDA Equity Derivatives Definitions, being part of the wider concept of Nationalization, Insolvency and Delisting
• Bankruptcy under Section 5(a)(vii) of the ISDA Master Agreement.

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