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Template:M summ Equity Derivatives 10: Difference between revisions
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{{dividends on index transactions}} | {{dividends on index transactions}} | ||
==Clause-by-clause== | ==Clause-by-clause== | ||
===Section {{eqderivprov|10.1(a)}}=== | ===Section {{eqderivprov|10.1(a)}} {{eqderivprov|Record Amount}}=== | ||
Referencing the {{eqderivprov|Ex Amount}} or the {{eqderivprov|Record Amount}} for a manufactured distribution under an [[equity derivative]] doesn’t make much sense. Referencing the {{eqderivprov|Paid Amount}} ''would'', had {{icds}} drafted it properly. The [[JC]] has a proposed [[Paid Amount (Dividend Amount) - Equity Derivatives Provision|fix]]. | Referencing the {{eqderivprov|Ex Amount}} or the {{eqderivprov|Record Amount}} for a manufactured distribution under an [[equity derivative]] doesn’t make much sense. Referencing the {{eqderivprov|Paid Amount}} ''would'', had {{icds}} drafted it properly. The [[JC]] has a proposed [[Paid Amount (Dividend Amount) - Equity Derivatives Provision|fix]]. | ||
===Section {{eqderivprov|10.1(b)}}=== | |||
===Section {{eqderivprov|10.1(b)}} {{eqderivprov|Ex Amount}}=== | |||
A key part of the Kafkaesque labyrinth you must navigate to work out how much, and when, your {{eqderivprov|Dividend Amount}} (or, if you’re looking at paragraph {{eqderivprov|10.7(b)}}, {{eqderivprov|Extraordinary Dividend}}) will be paid. | A key part of the Kafkaesque labyrinth you must navigate to work out how much, and when, your {{eqderivprov|Dividend Amount}} (or, if you’re looking at paragraph {{eqderivprov|10.7(b)}}, {{eqderivprov|Extraordinary Dividend}}) will be paid. | ||
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Note how [[coronavirus|an unexpected cessation of all non-essential economic activity in the western world]] has threatened to reveal embedded [[snafu]] drafting in the Equity Derivatives Definitions. See the “For completists” section below for more. | Note how [[coronavirus|an unexpected cessation of all non-essential economic activity in the western world]] has threatened to reveal embedded [[snafu]] drafting in the Equity Derivatives Definitions. See the “For completists” section below for more. | ||
=== Section {{eqderivprov|10.1(c)}} === | |||
=== Section {{eqderivprov|10.1(c)}} {{eqderivprov|Paid Amount}}=== | |||
The {{eqderivprov|Paid Amount}} problem. So we have ''two'' problems: what to do if the [[record date]] for a {{eqderivprov|Dividend Amount}} falls ''before'' the [[trade date]] for a {{eqderivprov|Transaction}}, and what to do if the [[dividend payment date]] falls ''after'' the {{eqderivprov|Transaction}} terminates. | The {{eqderivprov|Paid Amount}} problem. So we have ''two'' problems: what to do if the [[record date]] for a {{eqderivprov|Dividend Amount}} falls ''before'' the [[trade date]] for a {{eqderivprov|Transaction}}, and what to do if the [[dividend payment date]] falls ''after'' the {{eqderivprov|Transaction}} terminates. | ||
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::(b) where the {{isdaprov|Transaction}} terminates ''after'' the {{eqderivprov|Share}} commenced trading “[[ex-dividend]]” but ''before'' the scheduled {{eqderivprov|Dividend Payment Date}}, the {{eqderivprov|Equity Amount Payer}} will pay any {{eqderivprov|Paid Amount}} one [[settlement cycle]] following payment of the corresponding dividend by the {{eqderivprov|Issuer}} to holders of record of the {{eqderivprov|Share}}. | ::(b) where the {{isdaprov|Transaction}} terminates ''after'' the {{eqderivprov|Share}} commenced trading “[[ex-dividend]]” but ''before'' the scheduled {{eqderivprov|Dividend Payment Date}}, the {{eqderivprov|Equity Amount Payer}} will pay any {{eqderivprov|Paid Amount}} one [[settlement cycle]] following payment of the corresponding dividend by the {{eqderivprov|Issuer}} to holders of record of the {{eqderivprov|Share}}. | ||
===Section {{eqderivprov|10.2}}=== | ===Section {{eqderivprov|10.2}} {{eqderivprov|Dividend Payment Date}}=== | ||
Just part of the monster truck motorway pile-up that was {{icds}}s’ attempt to provide for manufactured dividends on equity derivatives. Total disaster. See {{eqderivprov|Dividend Amount}} for the full enormity of the situation. | Just part of the monster truck motorway pile-up that was {{icds}}s’ attempt to provide for manufactured dividends on equity derivatives. Total disaster. See {{eqderivprov|Dividend Amount}} for the full enormity of the situation. | ||
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So your cash payments will usually get paid on the intended {{eqderivprov|Currency Business Day}}; [[scrip|scrip dividend]]s might not get to you for a few days if the market is a bit salty. | So your cash payments will usually get paid on the intended {{eqderivprov|Currency Business Day}}; [[scrip|scrip dividend]]s might not get to you for a few days if the market is a bit salty. | ||
===Section {{eqderivprov|10.3}} {{eqderivprov|Dividend Period}}=== | |||
Somewhat muffs what you do with a {{eqderivprov|Paid Amount}} dividend that became due (i.e., had a [[record date]] before the termination date, but is not paid until after the termination date. | |||
===Section {{eqderivprov|10.4}} {{eqderivprov|Reinvestment of Dividends}}=== | |||
This adds the value of declared ''and paid'' dividends to the value of the {{eqderivprov|Equity Notional Amount}}. It references the {{eqderivprov|Cash Settlement Payment Date}} which assumes a [[cash dividend]] and not a [[scrip dividend]]) because if you aren’t actually settling the dividend at all, you don’t have to worry about there being some kind of disruption, which worry is implied in the definition of Settlement Amount - being the date you get physical settlement of a scrip dividend — but not in the Cash Settlement Payment Amount, which is the date for a cash dividend. I don't think I explained that very well. But hopefully you can see what I mean. Sort of. | |||
===Section {{eqderivprov|10.5}} {{eqderivprov|Dividend Payment Obligations Relating to Physically-settled Option Transactions}}=== | |||
There are some provisions of the 2002 ISDA Equity Derivatives Definitions that will cause extended, heated negotiation and a degree of enmity between even mild-mannered negotiators. This is not one of them. | |||