Template:M summ Equity Derivatives 12.9(a)(ii): Difference between revisions

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-===“It has become illegal”===
+===“[[Change in Law - Equity Derivatives Provision|It]] has become illegal”===
 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 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
+====Some ''other'' way of holding {{eqderivprov|Shares}}====
+What if it has become illegal to hold {{eqderivprov|Shares}} ''the way the {{eqderivprov|Hedging Party}} is holding them'', but it remains legal to hold them some ''other'' way? For example, if Shares needed to be listed on a certain {{eqderivprov|Exchange}}, or cleared across a certain clearinghouse? At first blush this seems fanciful but before you laugh don’t forget this was one of the potential consequences of [[Brexit means Brexit|Brexit]] — and for the Swissies — when the EU share trading obligation row blew up in 2019.
-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 {{eqderivprov|Shares}}” if in fact one ''could'' legally hold those {{eqderivprov|Shares}} some other way.  So this one’s a bit silly.
-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.
+====''Other'' hedges, without {{eqderivprov|Shares}}, still possible====
+What if one could [[hedge]] via [[futures]], [[derivatives]], [[GDR]]s or some other instrument without significant extra cost or inconvenience? Would that still count as a {{eqderivprov|Change in Law}}, just because you couldn't hedge with actual {{eqderivprov|Shares}}?
-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.
+But is “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]], [[swaps]], [[depositary receipts]] and so on)?
-All at the same, [[knee-slide and jet wings]] to the whoever the negotiator was who thought of that one.
+Well, as fussy as it may seem, it is hard to fault in its basic logic. The scope entertained by {{icds}} does seem a shade narrow, talking as it does only of {{eqderivprov|Shares}} and not other instruments by which one could [[hedge]] an exposure. Not even our old friend the [[good faith]] rider can win the day here, since the clause only talks about acquiring, holding or disposing of {{eqderivprov|Shares}} themselves. On the other hand, if a jurisdiction has declared the very act of holding a physical {{eqderivprov|Share}} illegal, it is hard to see anyone in the jurisdiction offering a swap 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 accommodate its client if it can source an alternative legal, somehow-derivative, [[hedge]].
+You may be [[inclined]], therefore, gracefully to concede. We don’t think you’ll have to do this often, this is a bit of an aficionado’s point. So, [[knee-slide and jet wings]] to the whoever the [[negotiator]] was who thought of it.