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Template:M summ Equity Derivatives 12.9(a)(ii): Difference between revisions
Template:M summ Equity Derivatives 12.9(a)(ii) (view source)
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For those inclined to look even gift horses in the mouth, this provision may appear to leave some things unsaid. | For those inclined to look even gift horses in the mouth, this provision may appear to leave some things unsaid. | ||
What if it has become illegal to hold {{eqderivprov|Shares}} in one way but it remains legal to hold them some other way? | What if it has become illegal to hold {{eqderivprov|Shares}} in one way but it remains legal to hold them some other way? What if there was a way of holding them legally, but it was different from the way you had chosen to hold them? For example, if Shares needed to be listed on a certain exchange, or cleared across a certain CCP? Don’t laugh: this was one of the potential consequences of Brexit | ||
Even leaving aside the direction that one must act in [[good faith]] in arriving at | What if one could hedge via [[futures]], [[derivatives]] or some other method without significant extra cost or inconvenience? | ||
Even leaving aside the direction that one must act in [[good faith]] in arriving at one’s conclusion, it is hard to see how one could say it was “illegal to hold shares” if in fact one ''could'' legally hold those {{eqderivprov|Shares}} some other way. | |||
As for the argument that to “hold, acquire or dispose of {{eqderivprov|Shares}} relating to such {{eqderivprov|Transaction}}” too narrow when a {{eqderivprov|Hedging Party}} may be able to hedge some other way (i.e., via [[futures]] or [[swaps]]) — well, as fussy as it may be, this seems hard to fault, and, not even [[good faith]] can win the day here. On the other hand, if a jurisdiction has declared the very act of holding a physical security illegal, it is hard to see anyone in the jurisdiction offering a derivative on it, so this may be more of a theoretical than a practical objection, especially where it is a [[synthetic equity swap]] where the hedging party has no incentive not to be accommodating its client in sourcing an alternative legal hedge if one exists. | As for the argument that to “hold, acquire or dispose of {{eqderivprov|Shares}} relating to such {{eqderivprov|Transaction}}” too narrow when a {{eqderivprov|Hedging Party}} may be able to hedge some other way (i.e., via [[futures]] or [[swaps]]) — well, as fussy as it may be, this seems hard to fault, and, not even [[good faith]] can win the day here. On the other hand, if a jurisdiction has declared the very act of holding a physical security illegal, it is hard to see anyone in the jurisdiction offering a derivative on it, so this may be more of a theoretical than a practical objection, especially where it is a [[synthetic equity swap]] where the hedging party has no incentive not to be accommodating its client in sourcing an alternative legal hedge if one exists. | ||
All at the same, [[knee-slide and jet wings]] to the whoever the negotiator was who thought of that one. | All at the same, [[knee-slide and jet wings]] to the whoever the negotiator was who thought of that one. | ||