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Cash Settlement of Equity Swap Transactions - Equity Derivatives Provision

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2002 ISDA Equity Derivatives Definitions
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Section 8.6 in a Nutshell™

Use at your own risk, campers!
8.6. Cash Settlement of Equity Swap Transactions. Where Cash Settlement applies for each Cash Settlement Payment Date under an Equity Swap Transaction, if the Type of Return is:
8.6(a) “Price Return”:
(i) if the Equity Amount is positive then the Equity Amount Payer will pay it (with any other amounts it owes) to the Equity Amount Receiver on the relevant Cash Settlement Payment Date; and
(ii) if the Equity Amount is negative then the Equity Amount Receiver will pay its absolute value (with any other amounts it owes) to the Equity Amount Payer on the relevant Cash Settlement Payment Date;
8.6(b) “Total Return” and “Re-investment of Dividends” does not apply, then Price Return will apply, only on each Dividend Payment Date, the Equity Amount Payer will pay any due Dividend Amount to the Equity Amount Receiver on the Dividend Payment Date; and
8.6(c) “Total Return” and “Re-investment of Dividends” applies, then Price Return will apply, only when determining each the Equity Amount on each later Cash Settlement Payment Date the Calculation Agent must adjust the Equity Notional Amount as described in Section 10.4.

Full text of Section 8.6

Section 8.6. Cash Settlement of Equity Swap Transactions. In respect of each Cash Settlement Payment Date for an Equity Amount Payer under an Equity Swap Transaction for which "Cash Settlement” is applicable:
8.6(a) if the Type of Return specified in the related Confirmation is “Price Return”, then:
(i) if the Equity Amount determined by the Calculation Agent in relation to that Equity Amount Payer is a positive number, then that Equity Amount Payer will pay (in addition to any other amounts payable by that Equity Amount Payer) to the Equity Amount Receiver the Equity Amount on the relevant Cash Settlement Payment Date; and
(ii) if the Equity Amount determined by the Calculation Agent in relation to that Equity Amount Payer is a negative number, then the Equity Amount Receiver will pay (in addition to any other amounts payable by that Equity Amount Receiver) to the Equity Amount Payer the absolute value of the Equity Amount on the relevant Cash Settlement Payment Date;
8.6(b) if the Type of Return specified in the related Confirmation is “Total Return” and “Re-investment of Dividends” is not applicable, then Section 8.6(a) will apply as though Price Return were the applicable Type of Return and, in addition, on each Dividend Payment Date, the relevant Equity Amount Payer will pay to the Equity Amount Receiver the relevant Dividend Amount (if any) owed by such Equity Amount Payer on that Dividend Payment Date; and
8.6(c) if the Type of Return specified in the related Confirmation is “Total Return” and “Re-investment of Dividends” is applicable, then Section 8.6(a) will apply as though Price Return were the applicable Type of Return, provided that for purposes of determining the relevant Equity Amount for each subsequent Cash Settlement Payment Date the Calculation Agent shall make the adjustment provided for in Section 10.4.


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