Template:M gen Equity Derivatives 10.1(c)

Fixing the Paid Amount concept

So we have two problems: what to do if the record date for a Dividend Amount falls before the trade date for a Transaction, and what to do if the dividend payment date falls after the Transaction terminates.

Neither of these contingencies, predictable though they seem to be, is addressed in the 2002 ISDA Equity Derivatives Definitions. But help is at hand: the JC — errors and omissions excepted, all usual disclaimers applying — humbly offers the following corrective for your Master Confirmation Agreement:

“Paid Amount” will apply, provided that:

(a) where the Share were trading “ex-dividend” as of the Effective Date, the Paid Amount will be zero; and

(b) where the Transaction terminates after the Share commenced trading “ex-dividend” but before the scheduled Dividend Payment Date, the Equity Amount Payer will pay any Paid Amount one settlement cycle following payment of the corresponding dividend by the Issuer to holders of record of the Share.