Increased Cost of Stock Borrow - Equity Derivatives Provision: Difference between revisions
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{{eqderivanat|12.9(a)(viii)}} | {{eqderivanat|12.9(a)(viii)}}{{eqderivanat|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: | ||
{{eqderivanat|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: | |||
*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 | ||
Revision as of 14:22, 5 September 2018
Template:EqderivanatTemplate:EqderivanatWhen the Hedging Party notifies an Increased Cost of Stock Borrow, specifiying a proposed Price Adjustment, the non-Hedging Party has three options:
- Accept the Price Adjustment and the Transaction is amended accordingly;
- Make a one-off payment of the determined Price Adjustment; or
- Terminate the Transaction on the second Scheduled Trading Day.
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.