Exchange shutdowns could trigger derivatives unwinds

Eight-day closure would invoke subjective valuation clauses; hedge disruption could cancel trades

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The bulk of the over-the-counter equity derivatives market could terminate en masse, while other contracts could be forced to settle on ‘subjective’ valuations, if stock exchanges shut their doors for an extended period to stem freefall in global equities.

Under equity definitions published by the International Swaps and Derivatives Association, a disruption event would cause payment, settlement and interim valuation observations to be pushed to the next scheduled trading day for the majority

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