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Change in Law - Equity Derivatives Provision: Difference between revisions
Change in Law - Equity Derivatives Provision (view source)
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===Omission of “[[Prong Y]]”=== | ===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 “{{eqderivprov|Increased Cost of Hedging}}”. | The industry has generally moved to omit [[Prong Y]] — the “material increase in costs” limb of this definition — because it is largely dealt with already in “{{eqderivprov|Increased Cost of Hedging}}”. It was introduced to capture those changes in law and regulation (changes in regulatory capital calculations, for very good example), that are driven by leglisation, but don’t outlaw the trade altogether, but just make it more expensive to run (either the {{eqderivprov|transaction}} itself, or its [[hedge]]) | ||
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 {{eqderivprov|Transaction}}” will necessarily relate to hedging, so a {{eqderivprov|Hedging Party}} (and, when it comes to it, a ''non-{{eqderivprov|Hedging Party}}'') should stand its ground on omitting “[[Prong Y]]”. | 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 {{eqderivprov|Transaction}}” will necessarily relate to hedging — if you suffer a higher [[regulatory capital]] charge on your actual {{eqderivprov|transaction}} with your {{isdaprov|counterparty}}, that would not be an {{eqderivprov|Increased Cost of Hedging}}, so a {{eqderivprov|Hedging Party}} (and, when it comes to it, a ''non-{{eqderivprov|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 {{eqderivprov|12.9(a)(ii)(Y)}} of the {{eqderivprov|Equity Definitions}} does not apply." | Those who do not have the stomach for this fight may see this expressed as: "Applicable, provided that Section {{eqderivprov|12.9(a)(ii)(Y)}} of the {{eqderivprov|Equity Definitions}} does not apply." | ||