Template:Nutshell Equity Derivatives 11.1(b): Difference between revisions

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{{eqderivprov|11.1(b)}} If, as of a {{eqderivprov|Valuation Date}}:
{{eqderivprov|11.1(b)}} If, as of a {{eqderivprov|Valuation Date}} an {{eqderivprov|Index Sponsor}} does any of the following (each an '''{{eqderivprov|Index Adjustment Event}}'''):
:(i) '''{{eqderivprov|Index Modification}} and {{eqderivprov|Index Cancellation}}''': an {{eqderivprov|Index Sponsor}} announces a material change to the {{eqderivprov|Index}}, its formula or calculation method (which is not built into the method to cater for routine market events) (an “'''{{eqderivprov|Index Modification}}'''”) or permanently cancels the {{eqderivprov|Index}} without launching a {{eqderivprov|Successor Index}} (an “'''{{eqderivprov|Index Cancellation}}'''”) or  
:(i) '''{{eqderivprov|Index Modification}}''': announces an material change to the {{eqderivprov|Index}} which was not built into the method to cater for routine market events; or
:(ii) '''{{eqderivprov|Index Disruption}}''': an {{eqderivprov|Index Sponsor}} fails to calculate and publish an {{eqderivprov|Index}} (an “'''{{eqderivprov|Index Disruption}}'''” and together with an {{eqderivprov|Index Modification}} and an {{eqderivprov|Index Cancellation}} an “'''{{eqderivprov|Index Adjustment Event}}'''”), then: <br>  
:(ii) '''{{eqderivprov|Index Cancellation}}''': cancels the {{eqderivprov|Index}} altogether; or  
:(A) if “'''[[Calculation Agent Adjustment (Adjustment Events) - Equity Derivatives Provision|Calculation Agent Adjustment]]'''” applies and the {{eqderivprov|Calculation Agent}} determines the {{eqderivprov|Index Adjustment Event}} has a material effect on the {{eqderivprov|Index Transaction}} it must make necessary calculations using the {{eqderivprov|Index}} level as at that {{eqderivprov|Valuation Date}}, as it determines using the formula for and method of calculating that {{eqderivprov|Index}} last in effect before the {{eqderivprov|Index Adjustment Event}}, using only those securities that comprised that {{eqderivprov|Index}} at the time of the {{eqderivprov|Index Adjustment Event}};<br>
:(iii) '''{{eqderivprov|Index Disruption}}''': fails to publish the {{eqderivprov|Index}} level —
:(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, failing which it will continue as adjusted; or <br>
Then: <br>  
:(C) if “'''[[Cancellation and Payment (Adjustment Events) - Equity Derivatives Provision|Cancellation and Payment]]'''” applies, then <br>
(A) if “'''[[Calculation Agent Adjustment (Adjustment Events) - Equity Derivatives Provision|Calculation Agent Adjustment]]'''” applies and the {{eqderivprov|Calculation Agent}} decides the {{eqderivprov|Index Adjustment Event}} has materially affected the {{eqderivprov|Index Transaction}}, it must calculate the {{eqderivprov|Index}} level for that {{eqderivprov|Valuation Date}}, using the {{eqderivprov|Index}} methodology in effect immediately before the {{eqderivprov|Index Adjustment Event}}, using only those securities comprising {{eqderivprov|Index}} at that time;<br>
::(1) for an {{eqderivprov|Index Disruption}}, the {{eqderivprov|Transaction}} will be cancelled on the {{eqderivprov|Valuation Date}}; <br>
(B) if “'''[[Negotiated Close-out (Adjustment Events) - Equity Derivatives Provision|Negotiated Close-out]]'''” applies, then unless the parties agree to terminate the {{eqderivprov|Transaction}} it will continue as adjusted; or <br>
::(2) for an {{eqderivprov|Index Cancellation}}, the {{eqderivprov|Transaction}} will be cancelled on the later of the {{eqderivprov|Exchange Business Day}} immediately before the {{eqderivprov|Index Cancellation}} is effective and the date the {{eqderivprov|Index Sponsor}} announces it, and <br>
(C) if “'''[[Cancellation and Payment (Adjustment Events) - Equity Derivatives Provision|Cancellation and Payment]]'''” applies, then:<br>
::(3) for an {{eqderivprov|Index Modification}}, either party may elect, on as much of two {{eqderivprov|Scheduled Trading Days}}’ notice as is possible to allow termination by the effective date of the {{eqderivprov|Index Modification}}, to cancel the {{eqderivprov|Transaction}} following the announcement of the {{eqderivprov|Index Modification}} but before the {{eqderivprov|Scheduled Trading Day}} on which {{eqderivprov|Index Modification}} is effective and  
:(1) for an {{eqderivprov|Index Disruption}}, the {{eqderivprov|Transaction}} will be cancelled on the {{eqderivprov|Valuation Date}}; <br>
:::(X) for an {{eqderivprov|Index Option Transaction}} or an {{eqderivprov|Index Basket Option Transaction}}, {{eqderivprov|Seller}} will pay to {{eqderivprov|Buyer}} the Section {{eqderivprov|12.7(b)(ii)}} amount, and  
:(2) for an {{eqderivprov|Index Cancellation}}, the {{eqderivprov|Transaction}} will be cancelled on the later of the {{eqderivprov|Exchange Business Day}} immediately before the {{eqderivprov|Index Cancellation}} is effective and the date the {{eqderivprov|Index Sponsor}} announces it, and <br>
:::(Y) for an {{eqderivprov|Index Swap Transaction}}, an {{eqderivprov|Index Basket Swap Transaction}}, an {{eqderivprov|Index Forward Transaction}} or an {{eqderivprov|Index Basket Forward Transaction}}, the Section {{eqderivprov|12.7(c)}} amount will be paid by one party to the other.  
:(3) for an {{eqderivprov|Index Modification}}, either party may choose to cancel the {{eqderivprov|Transaction}} following the announcement of the {{eqderivprov|Index Modification}} but before the {{eqderivprov|Scheduled Trading Day}} on which {{eqderivprov|Index Modification}} is effective; and for Index Options, {{eqderivprov|Seller}} will pay to {{eqderivprov|Buyer}} the Section {{eqderivprov|12.7(b)(ii)}} amount, and for {{eqderivprov|Index}} Swaps and Forwards, the Section {{eqderivprov|12.7(c)}} amount will be paid by one party to the other.  
Any {{eqderivprov|Transaction}} cancelled as a result of an {{eqderivprov|Index Adjustment Event}} will be valued using the formula or method to calculate the {{eqderivprov|Index}} in effect immediately prior to such {{eqderivprov|Index Adjustment Event}}. <br>
Any {{eqderivprov|Transaction}} so cancelled will be valued using the {{eqderivprov|Index}} methodology in effect immediately before {{eqderivprov|Index Adjustment Event}}. <br>

Latest revision as of 17:57, 14 May 2020

11.1(b) If, as of a Valuation Date an Index Sponsor does any of the following (each an Index Adjustment Event):

(i) Index Modification: announces an material change to the Index which was not built into the method to cater for routine market events; or
(ii) Index Cancellation: cancels the Index altogether; or
(iii) Index Disruption: fails to publish the Index level —

Then:
(A) if “Calculation Agent Adjustment” applies and the Calculation Agent decides the Index Adjustment Event has materially affected the Index Transaction, it must calculate the Index level for that Valuation Date, using the Index methodology in effect immediately before the Index Adjustment Event, using only those securities comprising Index at that time;
(B) if “Negotiated Close-out” applies, then unless the parties agree to terminate the Transaction it will continue as adjusted; or
(C) if “Cancellation and Payment” applies, then:

(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 later of the Exchange Business Day immediately before the Index Cancellation is effective and the date the Index Sponsor announces it, and
(3) for an Index Modification, either party may choose to cancel the Transaction following the announcement of the Index Modification but before the Scheduled Trading Day on which Index Modification is effective; and for Index Options, Seller will pay to Buyer the Section 12.7(b)(ii) amount, and for Index Swaps and Forwards, the Section 12.7(c) amount will be paid by one party to the other.

Any Transaction so cancelled will be valued using the Index methodology in effect immediately before Index Adjustment Event.

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