Exchanges, Clearing Systems and Currencies - Equity Derivatives Provision
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2002 ISDA Equity Derivatives Definitions
A Jolly Contrarian owner’s manual™ Exchanges, Clearing Systems and Currencies in a Nutshell™
Original text
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Comparisons
A JC-curated sub-division of the General Definitions section. We sub-group the Section 1 definitions into the following subgroups:
- Transactions — Sections 1.1 - 1.12
- Underliers — Sections 1.13 - 1.16
- Trade Details — Sections 1.17 - 1.24
- Exchanges, Clearing Systems and Currencies — Sections 1.25 - 1.37
- Trade Features — Sections 1.38 - 1.41
- Calculation Agent and Determination Agent - Section 1.40 and 12.8(f)
- Knock-ins and Knock-outs — Sections 1.42 - 1.51
Basics
These are the general definitions relating to Exchanges, Clearing Systems and Currencies.
Exchanges, Related Exchanges
Thanks to some lackadaisical drafting by the squad, JC have has a bit of a deep dive into the difference between “Exchange” and “Related Exchange”, and whether there is any call for an “Alternative Exchange”, in the premium section.
Clearance System
The artist known to to ISDA’s crack drafting squad™ as a Clearance System but to the rest of the world as a clearing system, or if it breaks down, whatever the parties can figure out. But in that regard see Additional Disruption Events and Extraordinary Events.
Index Sponsor
One who sponsors indices: the likes of Dow Jones, FTSE, Reuters, Eurostoxx, and for customised indices many of the banks and dealers.
Exchange Business Day
The sort of thing you would like to think did not need to be defined, enormously, but then there is what to do if the exchange closes unexpectedly halfway through its day — that is still an Exchange Business Day, but it may affect the Valuation Time. For much tedium in this regard do directly to the Disrupted Days and Valuation provisions of section 6 and the Physical Settlement provisions of Section 9.
Scheduled Closing Time
Scheduled Closing Time be like the scheduled “closing time”. We wonder what would happen if some kind of disintermediated, permissionless, always-on crypto-exchange with no scheduled closing time ever started — for trading NFTs of equities or something — but struggle to care, frankly.
Scheduled Trading Day
Scheduled Trading Day relates to the question of whether an Additional Disruption Event has happened, and what you can, or must, do if one has. There is quite a lot of material on those questions at Additional Disruption Event.
Euro and EC Treaty
This is, nowadays, bit of a historical artefact. Younger kids might get a minor thrill from imagining what it was like at the dawn of the Euro. At the time the ISDA’s crack drafting squad™ was labouring over the Equity Derivatives Definitions, the euro was a rather new-fangled thing, and as such there are a few provisions that have the air of skepticism about them that such a project could ever really work. After all, it is hard to see how a sovereign state could really control its fiscal policy without the levers of currency control and rate setting. But twenty years on, it all seems to have been an, um, well, a roaring success, so we needn’t have worried. Right?
That said, there have been some wobbles, and given the succession of global disasters that have befallen us since that single stabilising force for the modern world, David Bowie, left us — you know, Brexit, the decline of America, global pandemic, hyperinflation, war in Europe — we should not be at all surprised if the Euro falls apart next, and may yet be grateful for the ’squad’s patient curlicues.
Clearance System Business Day
A bit of deemery here: a day that is, or was meant to be, an ordinary clearing system business day even if, due to the vicissitudes of our nasty brutish and short modern life, no business is done on that day.
Settlement Cycle
Handy concept for specifying the date on which an action must be effected such that settlement takes place on a given date: eg “The Final Price will be determined one Settlement Cycle prior to the Termination Date”. Note also Correction of Share Prices and Index Levels in Section 11.4.
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