One of the key features that we highlighted was the new toolbox
format for the 2011 Equity Definitions, which comprises four
key documents: the 2011 definitions booklet (the so-called
"Main Book"), the Appendix, an ISDA Transaction Matrix
and a short-form Transaction Supplement.
At the time, ISDA had only published a template version of the
Appendix with a view to subsequently populating the template with
workable combinations of definitions, elections and methodologies
that would be rolled out on a product basis for equity
derivatives incorporating the 2011 Equity Definitions.
In November 2011, ISDA circulated a pre-publication draft of the
Appendix populated with supplementary definitions and operative
provisions that will apply to specific types of index variance
swaps. The provisions are very detailed and differ markedly from
the equivalent provisions in the 2002 ISDA Equity Definitions.
The ISDA Equity Definitions working group is continuing to work
on more specific terms for EU and US index variance swaps with a
view to producing an updated and enhanced Appendix to accommodate
these transaction types during the course of 2012.
The 2002 ISDA Equity Derivatives Definitions will not be
replaced by its 2011 successor for some time yet.
However, given the complexity of the 2011 Equity
Definitions, we recommend that parties begin to familiarise
themselves with their contents so that they may begin to consider
the implications of the new definitions for their business
operations and transaction systems.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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While the use of cash settled equity swaps is an established part of the Australian securities market, their use in recent high profile takeovers in Australia has attracted much attention. In particular, this attention has focused on the use of swaps by bidders or potential bidders in target companies without disclosure.
An AFSL is required if a person carries on a financial services business in Australia, unless an exemption applies.
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