Equity Notional Reset - Equity Derivatives Provision

Commentary

Adapted from the User Guide:

Equity Notional Reset has been amended from the 1996 Definitions by Section 5.10 of the 2002 Definitions to reflect the change in terminology from "Equity Payment Date" to "Cash Settlement Payment Date".

If "Equity Notional Reset" is specified then for the first Cash Settlement Payment Date, the Equity Notional Amount is the amount specified in the Confirmation and, for subsequent Cash Settlement Payment Dates, it is the sum of the Equity Notional Amount in respect of the prior Cash Settlement Payment Date and the Equity Amount in respect of the prior Cash Settlement Payment Date.

Lastly, if a "Notional Amount" has been specified in the Confirmation, such amount will be adjusted as set forth in Sections 5.10(a) and (b) as though it were an Equity Notional Amount.

If parties wish to extend the Floating Amount Payer Calculation Period in the situation where a Payment Date does not correspond with a Cash Settlement Payment Date, they should consider including the following additional language to the end of the definition of Payment Date:

"provided that, if on such date the corresponding Cash Settlement Payment Date has not yet occurred, such Payment Date shall be postponed to the date on which the Cash Settlement Payment Date occurs and the Floating Amount Payer shall pay the Floating Amount due in relation to the relevant Calculation Period on that postponed Payment Date."

As an alternative to extending the Floating Amount Payer Calculation Period in this situation, the parties may wish to defer payment of the Floating Amount to the Cash Settlement Payment Date, and accrue interest during that period. lf the parties wish to take that approach, they may wish to consider adding the following language:

", provided that, if on such date (the "Original Payment Date") the corresponding Cash Settlement Payment Date has not yet occurred, (i) the Calculation Period will be deemed to end on (but exclude) the Original Payment Date, (ii) interest will accrue on the Floating Amount from (and including) the Original Payment Date to (but exch1ding) the Cash Settlement Payment Date at [ ] calculated on the basis of daily compounding and the actual number of days elapsed and (iii) the Floating Amount Payer shall pay the relevant Floating Amount, together with any accrued interest, on the Cash Settlement Payment Date".