Template:Nutshell Equity Derivatives 1

Article 1 Certain General Definitions
1.1. “Transaction” means an Option Transaction, Forward Transaction, Equity Swap Transaction or other transaction which incorporates these Definitions.
1.2. “Option Transaction” means an OTC equity option transaction:

(a) on a single index (an “Index Option Transaction”)

(b) on a single share (a “Share Option Transaction”)

(c) on a basket of indices (an “Index Basket Option Transaction”) or

(d) on a basket of shares (a “Share Basket Option Transaction”).

1.3. A “Forward Transaction” means an OTC equity forward transaction:

(a) on a single index (an “Index Forward Transaction”);

(b) on a single security (a “Share Forward Transaction”);

(c) on a basket of indices (an “Index Basket Forward Transaction); or

(d) on a basket of securities (a “Share Basket Forward Transaction”).

1.4. “Equity Swap Transaction” means an Index Swap Transaction, a Share Swap Transaction, an Index Basket Swap Transaction or a Share Basket Swap Transaction.
1.5. An “Index Transaction” means an Index Option Transaction, Index Forward Transaction or Index Swap Transaction.
1.6. “Share Transaction” means any Transaction referencing a single Share, other than a Share Basket Transaction.
1.7. “Index Basket Transaction” means an Index Basket Option Transaction, Index Basket Forward Transaction or Index Basket Swap Transaction.
1.8. “Share Basket Transaction” means a Share Basket Option Transaction, Share Basket Forward Transaction or Share Basket Swap Transaction.
1.9. “Basket Option Transaction” means an Index Basket Option Transaction or Share Basket Option Transaction.
1.10. “Basket Forward Transaction” means an Index Basket Forward Transaction or Share Basket Forward Transaction.
1.11. “Basket Swap Transaction” means an Index Basket Swap Transaction or Share Basket Swap Transaction.
1.12. “Confirmation” means, for a Transaction, the confirmations exchanged between the parties which, taken together, evidence the terms of a Transaction.
1.13. “Index” will be specified in an Index Transaction or Index Basket Transaction.
1.14. “Shares” means the securities specified as such in a Share Transaction or Share Basket Transaction.
1.15. “Basket” means a basket of Indexes or Shares in the relative proportions (or numbers of Shares per Issuer) specified in the Confirmation.
1.16. “Issuer” means, like, the issuer. Of the Shares, like.
1.17. “Trade Date” must be specified in the Confirmation.
1.18. “Buyer” means the party so specified.
1.19. “Seller” means the party so specified.
1.20. “Number of Shares” means:

(a) For a Share Option Transaction: Number of Options * Option Entitlement;

(b) For a Share Forward Transaction or a Share Swap Transaction: The number of Shares specified in the Confirmation; and

(c) For each Issuer in a Share Basket Transaction: the number of Shares of that Issuer specified in the Confirmation.

1.21. “Number of Baskets”: The number of Baskets specified in the Confirmation for an Index Basket Transaction or Share Basket Transaction.
1.22. “Multiplier” must be specified in the Confirmation.
1.23. “Relevant Price” means:

1.23(a) For any Index on any Valuation Date or Averaging Date, the Index level the Calculation Agent determines per the Confirmation at the Valuation Time or, if a method is not specified, the Index level at the Valuation Time; and

1.23(b) For a Share, the price per Share the Calculation Agent determines at the Valuation Time on the Valuation Date or Averaging Date per the Confirmation or, if a method is not specified:

(i) Open outcry Exchanges: for any Share trading on an “open outcry” Exchange with a tradable price at the Valuation Time, the official trading price per Share at that time as reported by the Exchange; and

(ii) Dealer quotation Exchanges: for any Share trading on a dealer quotation Exchange, the mid-point of the highest bid and lowest ask prices quoted at (or immediately before) the Valuation Time on the Valuation Date or Averaging Date ignoring quotations that “lock” or “cross” the Exchange.

1.24. “Equity Notional Amount” will be as specified or, if not specified, will be the “Notional Amount”), adjusted for Equity Notional Resets, Re-investment of Dividends and any Adjustments and Modifications.
1.25. “Exchange” means each specified exchange for an Index or Share (and any Alternative Exchange).
1.26. “Related Exchange” means each specified exchange for an Index or Share and any Alternative Exchange. Where “All Exchanges” is specified, “Related Exchange” means each exchange the Calculation Agent considers to have a material effect on the overall market for trading futures or options on the Index or Share.
1.27. “Clearance System” means the specified clearing system for a Share (or any successor the Calculation Agent determines) or, if none, the main domestic clearance system for that Share on the Settlement Date. If it ceases clearing the Share, the parties must try to settle some other way.
1.28. “Index Sponsor” means the corporation or other entity that

(a) is responsible for the rules, procedures and calculation methods of the Index and

(b) regularly announces the Index level during each Scheduled Trading Day.

1.29. “Exchange Business Day” means any Scheduled Trading Day on which each Exchange and Related Exchange is open for trading during their respective regular trading sessions, even if it closes before its Scheduled Closing Time.
1.30. “Scheduled Closing Time” means the scheduled weekday closing time of an Exchange or Related Exchange on a Scheduled Trading Day, ignoring after-hours trading.
1.31. “Scheduled Trading Day” means a day when each Exchange and Related Exchange is scheduled to be open for their regular trading sessions.
1.32. “Currency Business Day” means a day on which commercial banks are open for business in the principal financial center for the currency or, for euro, when the TARGET system is operating.
1.33 Settlement Currency: The currency specified as such in the relevant Confirmation.
1.34. “Euro” means the lawful currency of the European Union.
1.35. “EC Treaty” means the Treaty of Rome establishing the European Community as amended from time to time.
1.36. “Clearance System Business Day” means any day on which a Clearance System is scheduled to be open for business.
1.37. “Settlement Cycle” means the usual period of Clearance System Business Days or Exchange Business Days) following a trade on which settlement usually occurs according to the Exchange’s rules. If there are multiple Exchanges, it will be the longest such period.
1.38. “Cash-settled” means that Cash Settlement applies to the Transaction.
1.39. “Physically-settled” means a Transaction to which Physical Settlement applies.
1.40. The “Calculation Agent” will be specified in the Confirmation. It must exercise its judgment in in good faith and in a commercially reasonable manner but, when doing so, is neither fiduciary nor advisor to either party.
1.41. “ISDA Master Agreement” means an ISDA Master Agreement, and “Event of Default”, “Affiliate” and “Early Termination Date” are as defined in the ISDA Master Agreement.
1.42. “Knock-in Price” must be specified in the Confirmation.
1.43. “Knock-out Price” must be specified in the Confirmation.
1.44. Knock-in Event.

(a) If “Knock-in Event” applies, a party’s right to exercise an Option under an Option Transaction will be conditional upon the Knock-in Event existing when it is exercised on any Knock-in Determination Day. The parties’ rights and obligations will be altered upon the such exercise as is specified in the Confirmation.

(b) “Knock-in Event” must be specified in the Confirmation. If it is not, but the Confirmation specifies a Knock-in Price for a Knock-in Reference Security that is also the specified Underlier for that Transaction, the Knock-in Event will occur:

(i) If the Knock-in Price on the Trade Date was higher than the initial level set for the Transaction: when the Knock-in Reference Security’s level at the Knock-in Valuation Time on a Knock-in Determination Day at least equals the Knock-in Price; and

(ii) If the Knock-in Price on the Trade Date was lower than the initial level set for the Transaction: when the Knock-in Reference Security‘s level at the Knock-in Valuation Time on a Knock-in Determination Day at most equals the Knock-in Price.

If the parties cannot agree whether a Knock-in Event has occurred, the Calculation Agent will decide.

1.45. Knock-out Event.

(a) If “Knock-out Event” applies, a party’s right to exercise an Option under a Transaction will be conditional upon the Knock-out Event not having occurred on any Knock-out Determination Day as of the time of such exercise, and the parties’ respective rights and obligations will be altered from the occurrence of the Knock-out Event as specified in the Confirmation.

(b) “Knock-out Event” must be specified in the Confirmation. If it is not, but the Confirmation specifies a Knock-out Price for a Knock-out Reference Security that is also the specified Index, Share or Basket for that Transaction, the Knock-out Event will occur:

(i) If the Knock-out Price on the Trade Date was higher than the initial level set for the Transaction: when the level of the Knock-out Reference Security at the Knock-out Valuation Time on any Knock-out Determination Day is at least equal to the Knock-out Price; and

(ii) If the Knock-out Price on the Trade Date was lower than the initial level set for the Transaction: when the level of the Knock-out Reference Security at the Knock-out Valuation Time on any Knock-out Determination Day is equal to or lower than the Knock-out Price.

If the parties cannot agree whether a Knock-out Event has occurred, the Calculation Agent will decide.

1.46. “Knock-in Reference Security” means, where a Knock-in Event applies, the index, share or basket specified as such in the Confirmation or, if not specified, the specified Underlier.
1.47. “Knock-out Reference Security” means, where a Knock-out Event applies, the index, share or basket specified as such in the Confirmation or, if not specified, the specified Underlier.
1.48. “Knock-in Determination Day” means each specified Scheduled Trading Day, unless it is a Disrupted Day due to an event occurring before the Knock-in Valuation Time, in which case it will be the following undisrupted Scheduled Trading Day, though if eight Scheduled Trading Days in a row are Disrupted Days, the eighth one, even though a Disrupted Day, will be the Knock-in Determination Day. In this case the Calculation Agent must determine the level of the Knock-in Reference Security as if it were an Underlier on a disrupted Valuation Date using the method set out in Section 6.6.

Unless otherwise specified the Knock-in Determination Days will be each Scheduled Trading Day from and including the Trade Date to and including the final Valuation Date, the Expiration Date or, if none, the date one Settlement Cycle prior to the final Settlement Date for the Transaction (adjusted as necessary under Sections 3.1(f) and 6.6).
1.49. “Knock-out Determination Day” means each specified Scheduled Trading Day, unless it is a Disrupted Day due to an event occurring before the Knock-out Valuation Time, in which case it will be the following undisrupted Scheduled Trading Day, though if eight Scheduled Trading Days in a row are Disrupted Days, the eighth one, even though a Disrupted Day, will be the Knock-out Determination Day. In this case the Calculation Agent must determine the level of the Knock-out Reference Security as if it were an Underlier on a disrupted Valuation Date using the method set out in Section 6.6.

Unless otherwise specified the Knock-out Determination Days will be each Scheduled Trading Day from and including the Trade Date to and including the final Valuation Date, the Expiration Date or, if none, the date one Settlement Cycle prior to the final Settlement Date for the Transaction (adjusted as necessary under Sections 3.1(f) and 6.6).
1.50. “Knock-in Valuation Time” means the specified time on any Knock-in Determination Day or, if there is none, the Valuation Time specified in the related Confirmation, or if none, the Scheduled Closing Time on the relevant exchange for the Knock-in Reference Security on any Knock-in Determination Day

If an exchange closes early and before the specified Knock-in Valuation Time, the Knock-in Valuation Time will be that actual closing time.
1.51. “Knock-out Valuation Time” means the specified time on any Knock-out Determination Day or, if there is none, the Valuation Time specified in the related Confirmation, or if none, the Scheduled Closing Time on the relevant exchange for the Knock-out Reference Security on any Knock-out Determination Day

If an exchange closes early and before the specified Knock-out Valuation Time, the Knock-out Valuation Time will be that actual closing time.