Template:M summ Equity Derivatives 1.31

Additional Disruption Events dans une Nutshell™

The important Additional Disruption Events are the Triple Cocktail: Change in Law, Hedging Disruption and Increased Cost of Hedging. They have marginally different play-out rights:

• Change in Law: Either party can terminate on 2 Scheduled Trading Day’s notice, at the Cancellation Amount.
• Hedging Disruption: Hedging Party can terminate on 2 Scheduled Trading Day’s notice, at the Cancellation Amount.
• Increased Cost of Hedging: Hedging Party can present the other guy with a proposed Price Adjustment. Other guy, within 2 Scheduled Trading Days, either accepts the Price Adjustment in an amended trade, pays the PV of the Price Adjustment in full, or the Hedging Party can terminate the trade on the second Scheduled Trading Day, at the Cancellation Amount.

Okay, okay, I hear you — LOSB and ICOSB are important too. For those:

• Loss of Stock Borrow: Hedging Party gives 2 Scheduled Trading Day’s notice of the LOSB. Other guy can either lend the shares itself at the Maximum Stock Loan Rate or lower, or if it doesn’t the Hedging Party can terminate the trade at the Cancellation Amount.
• Increased Cost of Stock Borrow: Hedging Party can present the other guy with a proposed Price Adjustment. Other guy, within 2 Scheduled Trading Days, either accepts the Price Adjustment in an amended trade, pays the PV of the Price Adjustment in full, or lend the Hedging Party the necessary Shares, Failing this, the Hedging Party can terminate the trade on the second Scheduled Trading Day, at the Cancellation Amount.

Insolvency Filing and Failure to Deliver ... well — are they even applied in your confirm?