Market Disruption Event - Equity Derivatives Provision: Difference between revisions

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{{eqderivanat|6.3(a)|}}
{{Manual|DEQ|2002|6.3(a) Section||long|}}
===What counts as Market Disruption?===
A {{eqderivprov|Market Disruption Event}} is a {{eqderivprov|Trading Disruption}} or {{eqderivprov|Exchange Disruption}} that exists during the hour before any {{eqderivprov|Valuation Time}} or {{eqderivprov|Exercise Time}} — it keys of the occurrence or existence of hte event, not the point when the {{eqderivprov|Calculation Agent}} determined it — or {{eqderivprov|Early Closure}}. The point is to capture material disruptions around the close of the market. If there ''was'' a disruption earlier in the day, but it cleared up by lunchtime, then — as far as valuing [[equity derivatives]] is concerned — all is Kool and the Gang. The kinds of disruptions are:
*'''{{eqderivprov|Trading Disruption}}''': suspension/limitation in trading on an underlier (or futures on it) on any {{eqderivprov|Exchange}}/{{eqderivprov|Related Exchange}}
*'''{{eqderivprov|Exchange Disruption}}''': any event that impairs the ability to value, settle transactions across any {{eqderivprov|Exchange}}/{{eqderivprov|Related Exchange}}
*'''{{eqderivprov|Early Closure}}''': the closure of any {{eqderivprov|Exchange}}/{{eqderivprov|Related Exchange}} prior to scheduled closing time unless announced at least one hour prior to the earlier of (i) the actual closing time for the regular trading session on that exchange and (ii) the submission deadline for orders on {{eqderivprov|Exchange}} for execution at the {{eqderivprov|Valuation Time}}
 
Additionally a day is “{{eqderivprov|Disrupted Day}}” if an {{eqderivprov|Exchange}}/{{eqderivprov|Related Exchange}} fails to open for trading during a regular trading session.
 
===Indices===
In the case of an {{eqderivprov|Index}}, the disruption needs to affect 20% of more of the securities comprising the {{eqderivprov|Index}} for the {{eqderivprov|Index}} to be treated as disrupted. In that case valuation is moved for the whole index, not just the disrupted part.
 
=====Baskets=====
In the case of {{eqderivprov|Baskets}} where some underliers are disrupted and some aren’t, only the affected underliers are subject to disruption provisions and the undisrupted aspects settle/value as scheduled.
 
====={{eqderivprov|Exchange}}/{{eqderivprov|Related Exchange}}=====
*Determining which are the “{{eqderivprov|Exchanges}}” and “{{eqderivprov|Related Exchanges}}” is ordinarily straightforward as they are specified in the confirmation.
*However, where “{{eqderivprov|All Exchanges}}” is specified as the “{{eqderivprov|Related Exchange}}”, then the {{eqderivprov|Market Disruption Event}} may be triggered if there is a disruption on any exchange where trading has a material effect (as determined by {{eqderivprov|Calculation Agent}}) on the overall market for futures or options relating to the underlier.
 
{{sa}}
*{{eqderivprov|Disrupted Day}}, being a day on which a {{eqderivprov|Market Disruption Event}} has occurred.
*{{eqderivprov|Consequences of Disrupted Days}};
*{{eqderivprov|Trading Disruption}} under {{eqderivprov|6.3(b)}};
*{{eqderivprov|Exchange}};
*{{eqderivprov|Related Exchange}};
*{{eqderivprov|Exchange Disruption}} under {{eqderivprov|6.3(c)}};
*{{eqderivprov|Early Closure}} under {{eqderivprov|6.3(d)}}.
 
{{vwapadjustment}}
{{eqderivanatomy}}

Revision as of 23:34, 26 March 2020

2002 ISDA Equity Derivatives Definitions
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6.3(a) Section in a Nutshell™

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