Increased Cost of Stock Borrow - Equity Derivatives Provision: Difference between revisions

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{{fullanat2|eqderiv|12.9(a)(viii)||12.9(b)(v)|}}
{{eqderivanat|12.9(a)(viii)}}
{{box|
{{eqderivanat|12.9(b)(v)}}
{{Nuts|Equity Derivatives|12.9(b)(v)}}}}
When the {{eqderivprov|Hedging Party}} notifies an {{eqderivprov|Increased Cost of Stock Borrow}}, specifiying a proposed {{eqderivprov|Price Adjustment}}, the non-Hedging Party has three options:
'''Summary''': When the Hedging Party notifies an {{eqderivprov|Increased Cost of Stock Borrow}}, specifiying a proposed {{eqderivprov|Price Adjustment}}, the non-Hedging Party has three options:
*Accept the {{eqderivprov|Price Adjustment}} and the {{eqderivprov|Transaction}} is amended accordingly;
#Accept the {{eqderivprov|Price Adjustment}} and the {{eqderivprov|Transaction}} is amended accordingly;
*Make a one-off payment of the determined {{eqderivprov|Price Adjustment}}; or
#Make a one-off payment of the determined {{eqderivprov|Price Adjustment}}; or
*Terminate the {{eqderivprov|Transaction}} on the second {{eqderivprov|Scheduled Trading Day}}.
#Terminate the {{eqderivprov|Transaction}} on the second {{eqderivprov|Scheduled Trading Day}}.
Only if the {{eqderivprov|Non-Hedging Party}} has failed to give any such election by the end of the second {{eqderivprov|Scheduled Trading Day}} can the {{eqderivprov|Hedging Party}} terminate the {{eqderivprov|Transaction}}. The {{eqderivprov|Non-Hedging Party}} can lend the {{eqderivprov|Hedging Party}} the relevant {{eqderivprov|Shares}} in the intervening period to mitigate its loss.
Only if the {{eqderivprov|Non-Hedging Party}} has failed to give any such election by the end of the second {{eqderivprov|Scheduled Trading Day}} can the {{eqderivprov|Hedging Party}} terminate the {{eqderivprov|Transaction}}. The {{eqderivprov|Non-Hedging Party}} can lend the {{eqderivprov|Hedging Party}} the relevant {{eqderivprov|Shares}} in the intervening period to mitigate its loss.


Compare and Contrast with {{eqderivprov|Loss of Stock Borrow}}, where the {{eqderivprov|Non-Hedging Party}} has a bit less flexibility in what it does: it either has to pony up (or procure) a stock borrow within 2 {{eqderivprov|Scheduled Trading Days}} itself, or {{eqderivprov|Hedging Party}} can terminate. Therefore {{eqderivprov|Increased Cost of Stock Borrow}} is the "gentler" provision from the {{eqderivprov|Non-Hedging Party}}'s perspective.
Compare with {{eqderivprov|Loss of Stock Borrow}}, where the {{eqderivprov|Non-Hedging Party}} has a bit less flexibility in what it does: it either has to pony up (or procure) a stock borrow within 2 {{eqderivprov|Scheduled Trading Days}} itself, or {{eqderivprov|Hedging Party}} can terminate. Therefore {{eqderivprov|Increased Cost of Stock Borrow}} is the "gentler" provision from the {{eqderivprov|Non-Hedging Party}}’s perspective.
 
{{seealso}}
====Related Provisions====
*{{eqderivprov|Loss of Stock Borrow}}
*{{eqderivprov|Loss of Stock Borrow}}
{{eqderivanatomy}}

Revision as of 14:20, 5 September 2018

Template:Eqderivanat Template:Eqderivanat When the Hedging Party notifies an Increased Cost of Stock Borrow, specifiying a proposed Price Adjustment, the non-Hedging Party has three options:

Only if the Non-Hedging Party has failed to give any such election by the end of the second Scheduled Trading Day can the Hedging Party terminate the Transaction. The Non-Hedging Party can lend the Hedging Party the relevant Shares in the intervening period to mitigate its loss.

Compare with Loss of Stock Borrow, where the Non-Hedging Party has a bit less flexibility in what it does: it either has to pony up (or procure) a stock borrow within 2 Scheduled Trading Days itself, or Hedging Party can terminate. Therefore Increased Cost of Stock Borrow is the "gentler" provision from the Non-Hedging Party’s perspective.

See also

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