Hedging Disruption - Equity Derivatives Provision

From The Jolly Contrarian
Jump to navigation Jump to search
2002 ISDA Equity Derivatives Definitions

A Jolly Contrarian owner’s manual™

12.9(a)(v) in a Nutshell

The JC’s Nutshell summary of this term has moved uptown to the subscription-only ninja tier. For the cost of ½ a weekly 🍺 you can get it here. Sign up at Substack.

12.9(a)(v) in all its glory

12.9(a)(v)Hedging Disruption” means that the Hedging Party is unable, after using commercially reasonable efforts, to (A) acquire, establish, re-establish, substitute, maintain, unwind or dispose of any transaction(s) or asset(s) it deems necessary to hedge the equity price risk of entering into and performing its obligations with respect to the relevant Transaction, or (B) realize, recover or remit the proceeds of any such transaction(s) or asset(s);

Resources and Navigation



This is what counts as a Hedging Disruption. To find out what happens when you have a Hedging Disruption, see the Consequences of Hedging Disruption at Section 12.9(b)(iii).



It isn’t brilliantly worded, but the spirit is clear: it is not just that your particular hedge that you actually had on went kaput, but that you could find any reasonably suitable replacement for it. You can’t be picky. Okay, the equities market might be locked up, but what about futures? I grant you, if the underlying market is disrupted, it’s likely the listed futures market will be too, but you never know. How about ADRs or GDRs?

Premium content

Here the free bit runs out. Subscribers click 👉 here. New readers sign up 👉 here and, for ½ a weekly 🍺 go full ninja about all these juicy topics 👇
  • The JC’s famous Nutshell summary of this clause
  • What of informal action by a regulator?
  • The bogus “why should I pay your hedging costs? I have no control over them” argument
  • Commentary on other pernickety amendments

See also