Template:M summ Equity Derivatives Partial Cancellation and Payment

So, what is going on here then? Well, in a certain type of Transaction — specifically, a Share Basket Transaction — an Extraordinary Event may affect one but not the other Shares in the Basket: Tender Offer, Merger Event, Nationalization, Insolvency or a Delisting.

In this case there is the opportunity to partially cancel the Transaction, pay that bit of it out, and the remainder of the Transaction carries on, at the reduced notional. Partial Cancellation and Payment isn’t relevant for a single Share Transaction — it’s all or nothing, obviously enough — nor an Index Transaction, because the Index will likely be adjusted and recalculated (there may be a substitution or some such thing) but in any case the notional of the Transaction does not reduce in this case: rather the deterioration in value is reflected in the level of the Index.