Template:M gen Equity Derivatives 11
| Action | Applies to | What it does | Comments |
|---|---|---|---|
| Calculation Agent Adjustment | Index Adjustment Event Dilution or Concentration Event Merger Event Tender Offer |
Allows the Calculation Agent discretion to determine whether the adjustment is material and if so adjust the terms of the Transaction to account for its economic effects (or if not possible, for Mergers and Tenders, to terminate the trade at Cancellation and Payment) | The Index Adjustment Events language is worded quite differently from the corresponding provision for Merger Events and Tender Offers. Note for the latter the CA may not adjust the spread or account for changes in volatility, dividends, stock loan rates or liquidity). |
| Modified Calculation Agent Adjustment | Merger Event Tender Offer |
Normal Calculation Agent Adjustment only you are allowed to adjust the spread and make changes for volatility, dividends, stock loan rates and liquidity | See comparison between Calculation Agent Adjustment and Modified Calculation Agent Adjustment |
| Options Exchange Adjustment | Dilution or Concentration Event Merger Event Tender Offer |
Calculation Agent will adjust the terms of the Transaction to reflect adjustments made to exchange-traded options on the Underlier (or that the Calculation Agent determines would have been made had there been exchange-traded options on the shares). | In a splendid economy, Merger Event and Tender Offer refers back to the Dilution or Concentration Event wording (but ignores the “diluting or concentrative effect” bit). |
| Cancellation and Payment | Index Adjustment Event Merger Event Tender Offer Nationalization, Insolvency and Delisting |
Transaction is cancelled (the timing for which depends on the event) and the CA determines the Cancellation Amount under Section 12.7 | This is the standard method where you run out of road and can’t continue the transaction. |
| Partial Cancellation and Payment | Merger Event Tender Offer Nationalization, Insolvency and Delisting |
The Affected part of the Transaction is cancelled, the remainder carries on unaffacted. | This applies where you can’t continue a part of the Transaction — which will only happen where you have a Share Basket Transaction, and the Adjustment Event affects only some of the Shares in the basket. |
| Component Adjustment | Merger Event Tender Offer |
Share-for-Combined is just a hybrid of Share-for-Share and Share-for-Other and applies where consideration for a Merger Event or Tender Offer comes partly in the shape of New Shares and partly through some other imaginative and means raising the necessary funds. Here, as you would expect, you get Share-for-Share on the New Shares, and Share-for-Other for the non-share component | Just a logical working out of the fact that, just as you might have a corporate event in the form of a Share-for-Share or a Share-for-Other, so might you have one that is a bit of both. |