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Loss of Stock Borrow - Equity Derivatives Provision: Difference between revisions
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Loss of Stock Borrow - Equity Derivatives Provision (view source)
Revision as of 14:04, 19 June 2014
, 19 June 2014→Commentary
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{{eqderivsnap|12.9(b)(iv)}} | {{eqderivsnap|12.9(b)(iv)}} | ||
====Commentary==== | ====Commentary==== | ||
Compare and contrast with {{eqderivprov|Increased Cost of Stock Borrow}}. There is a logical handoff and interaction between the two. | '''Summary''': Where the Hedging Party can't locate a stock borrow, the Non-Hedging Party has the option to provide one that is struck at less than the Maximum Stock Loan Rate, or if it can't within two Scheduled Trading Days, the Hedging Party can terminate the Transaction. | ||
'''Compare and contrast''' with {{eqderivprov|Increased Cost of Stock Borrow}}. There is a logical handoff and interaction between the two. | |||
*If the cost of a stock borrow exceeds the {{eqderivprov|Maximum Stock Loan Rate}} it is deemed to be (as good as) impossible to borrow stock, so it is treated as a {{eqderivprov|Loss of Stock Borrow}}, not merely an {{eqderivprov|Increased Cost of Stock Borrow}}. If a counterparty wants to apply Increased Cost of Stock Borrow whatever the cost of an available bid, the answer is to disapply {{eqderivprov|Maximum Stock Loan Rate}} altogether. This means that ''any'' possible stock borrow rate, however astronomical, comes under {{eqderivprov|Increased Cost of Stock Borrow}}, and {{eqderivprov|Loss of Stock Borrow}} (which is slightly more onerous a termination right) only applies where there are no offers in the market at all. | *If the cost of a stock borrow exceeds the {{eqderivprov|Maximum Stock Loan Rate}} it is deemed to be (as good as) impossible to borrow stock, so it is treated as a {{eqderivprov|Loss of Stock Borrow}}, not merely an {{eqderivprov|Increased Cost of Stock Borrow}}. If a counterparty wants to apply Increased Cost of Stock Borrow whatever the cost of an available bid, the answer is to disapply {{eqderivprov|Maximum Stock Loan Rate}} altogether. This means that ''any'' possible stock borrow rate, however astronomical, comes under {{eqderivprov|Increased Cost of Stock Borrow}}, and {{eqderivprov|Loss of Stock Borrow}} (which is slightly more onerous a termination right) only applies where there are no offers in the market at all. | ||
====Related Provisions==== | ====Related Provisions==== | ||
{{eqderivanatomy}} | {{eqderivanatomy}} | ||