Change in Law - Equity Derivatives Provision

Template:Eqderivanat Part of the great triple cocktail of protections against nasty things happening on your hedge.

Shares versus Hedge Positions

Common to see references in (x) to “Shares” replaced by the slightly wider “Hedge Positions”. Not objectionable.

Reasonable steps to avoid?

Uber pedants may also try to argue that there should be some obligation on the Hedging Party to take reasonable steps to avoid a change in law. This is silly, Chicken Lickenish behaviour. I mean, what are you meant to do? Lobby Congress? Remember, “Hedge Positions” is wider and more generic than “any particular hedge position that you happen to have on” at the time the law changes. If you can change your hedging strategy, you are not subject to a Change in Law. So resist this drafting, but don’t die in a ditch about it.

Omission of “Prong Y”

The industry has generally moved to omit Prong Y — the “material increase in costs” limb of this definition — because it is dealt with already in “Increased Cost of Hedging”.

But, if you were splitting hairs, you might say that not all “materially increased” costs a party may incur “in performing its obligations under such Transaction” will necessarily relate to hedging, so a Hedging Party (and, when it comes to it, a non-Hedging Party) should stand its ground on omitting “Prong Y”.

Those who do not have the stomach for this fight may see this expressed as: "Applicable, provided that Section 12.9(a)(ii)(Y) of the Equity Definitions does not apply."

See also, for example, the 2007 European Master Equity Derivatives Confirmation Agreement, which provides the following: Template:Eqderivsnap

Consequences

The consequences of a Change in Law (or an Insolvency Filing are set out in 12.9(b)(i): Template:Eqderivsnap