Increased Cost of Stock Borrow - Equity Derivatives Provision

Operative Provision

Commentary

Summary: When the Hedging Party notifies an Increased Cost of Stock Borrow, specifiying a proposed Price Adjustment, the non-Hedging Party has three options:

1. Accept the Price Adjustment and the Transaction is amended accordingly;
2. Make a one-off payment of the determined Price Adjustment; or
3. Terminate the Transaction on the second Scheduled Trading Day.

Only if the Non-Hedging Party has failed to give any such election by the end of the second Scheduled Trading Day can the Hedging Party terminate the Transaction. The Non-Hedging Party can lend the Hedging Party the relevant Shares in the intervening period to mitigate its loss.

Compare and Contrast with Loss of Stock Borrow, where the Non-Hedging Party has a bit less flexibility in what it does: it either has to pony up (or procure) a stock borrow within 2 Scheduled Trading Days itself, or Hedging Party can terminate. Therefore Increased Cost of Stock Borrow is the "gentler" provision from the Non-Hedging Party's perspective.