Template:M summ Equity Derivatives 9

Not enormously common, since the whole point of an equity derivative is to have price exposure without ever taking title to the Shares, with all the attendant tax, disclosures, mandatory take-over obligations and other miscellaneous regulatory hair that comes from physically owning shares that it would imply, but for you exotic types who might want to do this — especially those trading Forwards, Options — being contracts to maybe acquired Shares at a later date and not necessarily pure synthetic plays — here they are. The JC’s specialty bing synthetic equity swaps, this isn’t something that we have spent a lot of time on, but as we read them, the provisions are largely mechanical and while ISDA’s crack drafting squad™’s prose as a quality to it only Heath Robinson’s mother could love, when you boil it down, as we have done in our nutshell versions (see panel), they do make sense in a “that figures, I guess” or “that really ought to go without saying” kind of way.

So sorry for not having a lot to say, but here: knock yourself out.

Settlement Date

The Settlement Date is relevant for physical settlement of securities. Where cash is concerned, the droid you are looking for is the Cash Settlement Payment Date. Obviously a physical settlement is more fraught with risk of failures through disruption, exchange suspensions, illiquidity etc, whereas for the most part cash is cash and you just pay it.

Representation and Agreement

You get the sense that ISDA’s crack drafting squad™ had significant deal fatigue by this stage — reading this mush, I know I do — but it seems some of the representations and agreements required here are not things that a transferor can reasonably do anything about, let alone represent to, being out of its control and a function of the nature of the Shares underlying the Transaction. Now, true, to be eligible for clearing in a Clearance System, Shares generally need to be largely free of these kinds of consents, conditions precedent and restrictions on transfer — but if for some reason they are not, what is the poor receiver supposed to do about it, why is it in any better position to make this rep than the deliveror, and what good will the representation be in any case?