Related Exchange - 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 Section 1.26 in a Nutshell™ Use at your own risk, campers! 1.26. “Related Exchange” means each specified exchange for an Index or Share and any Alternative Exchange. Where “All Exchanges” is specified, “Related Exchange” means each exchange the Calculation Agent considers to have a material effect on the overall market for trading futures or options on the Index or Share. view template Full text of Section 1.26 Section 1.26. Related Exchange. “Related Exchange” means, subject to the proviso below, in respect of an Index relating to an Index Transaction or Index Basket Transaction or a Share relating to a Share Transaction or Share Basket Transaction, each exchange or quotation system specified as such for such Index or Share in the related Confirmation, any successor to such exchange or quotation system or any substitute exchange or quotation system to which trading in futures or options contracts relating to such Index or such Share has temporarily relocated (provided that the Calculation Agent has determined that there is comparable liquidity relative to the futures or options contracts relating to such Index or such Share on such temporary substitute exchange or quotation system as on the original Related Exchange), provided, however, that where “All Exchanges” is specified as the Related Exchange in the related Confirmation, “Related Exchange” shall mean each exchange or quotation system where trading has a material effect (as determined by the Calculation Agent) on the overall market for futures or options contracts relating to such Index or such Share. 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

Article 1. Certain General Definitions

1.1. Transaction
1.2. Option Transaction
1.3. Forward Transaction
1.4. Equity Swap Transaction
1.5. Index Transaction
1.6. Share Transaction
1.7. Index Basket Transaction
1.8. Share Basket Transaction
1.9. Basket Option Transaction
1.10. Basket Forward Transaction
1.11. Basket Swap Transaction
1.12. Confirmation
1.13. Index
1.14. Shares
1.15. Basket
1.16. Issuer
1.17. Trade Date
1.18. Buyer
1.19. Seller
1.20. Number of Shares
1.21. Number of Baskets
1.22. Multiplier
1.23. Relevant Price
1.24. Equity Notional Amount
1.25. Exchange
1.26. Related Exchange
1.27. Clearance System
1.28. Index Sponsor
1.29. Exchange Business Day
1.30. Scheduled Closing Time
1.31. Scheduled Trading Day
1.32. Currency Business Day
1.33. Settlement Currency
1.34. Euro
1.35. EC Treaty
1.36. Clearance System Business Day
1.37. Settlement Cycle
1.38. Cash-settled
1.39. Physically-settled
1.40. Calculation Agent
1.41. ISDA Master Agreement
1.42. Knock-in Price
1.43. Knock-out Price
1.44. Knock-in Event
1.45. Knock-out Event
1.46. Knock-in Reference Security
1.47. Knock-out Reference Security
1.48. Knock-in Determination Day
1.49. Knock-out Determination Day
1.50. Knock-in Valuation Time
1.51. Knock-out Valuation Time

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Summary

Related Exchange is relevant to Market Disruption Event. See also the related definition at “Exchange”.

In each case, the relevant Related Exchange will be specified in the Confirmation — the standard tends to be “All Exchanges”), and these are exchanges on which “trading in futures or options contracts relating to such Index or such Share” takes place.

Section 1.26 could have done with clearer punctuation in our humble view, but our best guess is that you determine the Related Exchange as follows:

• each “Related Exchange” so specified in the Confirmation — this could be in theory be an options exchange or a stock exchange, but for reasons set out below, we think it is meant to only be a futures or options exchange;
• any successor to those specified Related Exchanges, (also could be either, but) or
• any substitute exchange to the above to which trading in futures or options on the Index/Share has temporarily relocated, unless
• the Confirm specifies “All Exchanges”, in which case “Related Exchange” means all exchange or quotation systems that material effect the overall market for futures or options on the Index/Share.

Now you tell me, but this looks like an attempt to limit “Related Exchanges” to options and futures exchanges, and leave stock exchanges to the definition of regular “Exchange”s. This is corroborated by the fact that Settlement Cycle, Settlement Price and Final Price which are relevant to delivering and valuing Shares, only references “Exchanges”, not “Related Exchanges”, and most of the references to Related Exchanges in the defintions relate to the pricing of forwards and options — In-the-Moneyness of Calls and Puts, Trading Disruptions on options and futures, and in the related definition of Options Exchange, which definitely is meant to be an, um, Options Exchange.

Then again, there is a definition of Options Exchange: what the necessary difference is between a Related Exchange and Options Exchange, we have not quite yet nutted out. Do write in if you have any ideas.

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See also

• 1.25 Exchange

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