Confirmation - Equity Derivatives Provision

2002 ISDA Equity Derivatives Definitions
A Jolly Contrarian owner’s manual™

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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

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Section 1.12 in a Nutshell

Use at your own risk, campers!
1.12. “Confirmation” means, for a Transaction, the confirmations exchanged between the parties which, taken together, evidence the terms of a Transaction.

Full text of Section 1.12

Section 1.12. Confirmation. “Confirmation” means, in respect of a Transaction, one or more documents and other confirming evidence exchanged between the parties or otherwise effective, which when taken together confirm or evidence all of the terms of a Transaction.


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Confirmation is also defined under the ISDA Master Agreement, which is fun.

Summary

Section 1.12 Confirmations

Now back in the day, counterparties exchanged long-form conformations starting out “Dear Ladies and Gentlemen”, and cleaved to a long and tedious form, but in the quick-fire HFT world of Equity Derivatives it quickly became apparent this was quite the waste of trees: Transactions tend to be vanilla, delta-one and traded in high volumes.

Thus, ISDA-sponsored “master confirmations” quickly emerged — sort of intermediate steps between a Schedule and a trade Confirmation allowing parties to agree general terms up front, so the process of confirming was nothing more than a spreadsheet or .xml file exchanged at the end of each day.

Prime brokers developed their own synthetic equity swap master confirmations — somewhat more bespoke than the ISDA MCs, with a further level of standardisation of currencies and tenors, designed to replicate cash equity trading as nearly as possible.

All of these things count as Confirmations. No doubt some bright spark will try to do something one day on a blockchain. What is that? Oh, yes, sorry — not blockchain: ChatGPT. Keep up at the back.

See also

References