Consequences of Hedging Disruption - Equity Derivatives Provision
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Equity Derivatives Anatomy™
- 12.9(a)(v) “Hedging Disruption” means that the Hedging Party is unable, after using commercially reasonable efforts, to (A) acquire, establish, re-establish, substitute, maintain, unwind or dispose of any transaction(s) or asset(s) it deems necessary to hedge the equity price risk of entering into and performing its obligations with respect to the relevant Transaction, or (B) realize, recover or remit the proceeds of any such transaction(s) or asset(s);
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- 12.9(b)(iii) If “Hedging Disruption” is specified in the related Confirmation to be applicable to a Transaction, then upon the occurrence of such an event the Hedging Party may elect, while the Hedging Disruption is continuing, to terminate the Transaction, upon at least two Scheduled Trading Days’ notice to the Non-Hedging Party specifying the date of such termination, in which event the Determining Party will determine the Cancellation Amount payable by one party to the other.
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To be read in connection with the Hedging Disruption event. You may see a rider to this clause along the following lines:
- “Where reasonably practical, the Hedging Party must elect to terminate only the part of the Transaction with the Number of Shares corresponding to the Hedge Position that the Hedging Disruption relates to, and the Cancellation Amount is then determined over only the terminated part of the Transaction”.
See also