Practice Note 6.5.1B(2), 6.6.2, 6.7.11 and 8.2.2(3E) — Determination of Cash Settlement Amount
|Issue Date||Cross Reference||Enquiries|
|Added on 10 December 201810 December 2018.||Rules Rule 6.5.1B(2), 6.6.2, 6.7.11, 8.4.1A, 8.5.2A, 8.6F.2.||Please contact Clearing Ops:
E-Mail Address: firstname.lastname@example.org
Cash settlement under Rules 6.5.1B(2), 6.7.11 and 8.2.2(3E)
1. Under Rules 6.5.1B(2), 6.7.11 and 8.2.2(3E), CDP has the power to cash settle an obligation to deliver or a right to receive securities in respect of a Novated Contract in whole or in part.
2. The monetary sum to be paid or received pursuant to such cash settlement shall be as set out in this Practice Note.
3. When a Novated Contract for the sale of securities (a "Sell Contract"), or any part of it, is cash settled, a Novated Contract for the purchase of securities (a "Buy Contract"), or such part of it, comprising the same number of securities, will be correspondingly cash settled. In addition, a Buy Contract, or part of it, may be cash settled when there is an Event of Default in respect of the Clearing Member that is responsible for the corresponding Sell Contract.
4. Unless otherwise specified by CDP, the Cash Settlement Amount for both the Sell Contract and the Buy Contract, if applicable, will be the number of securities to be cash settled multiplied by:
(a) the highest of:
(i) the selling price of the trade that gave rise to the Sell Contract;
(ii) the purchase price of the trade that gave rise to the Buy Contract;
(iii) the following as may be applicable:
(I) for shares: 120% of the latest closing price;
(II) for rights and company warrants: 120% of the latest closing price of the underlying security, less the exercise price, taking into account the conversion ratio;
(III) for structured warrants: 120% of the final settlement value; or
(b) such other price, based on such methodology, as CDP shall in its discretion determine.
Cash settlement under Rule 6.6.2
5. Under Rule 6.6.2, CDP has the power to cash settle an obligation to deliver securities in respect of a Novated Contract, in whole or in part.
6. The monetary sum to be paid pursuant to such cash settlement shall be a fair and appropriate sum as determined by CDP.
Amended on 6 September 2021.