EFTA01353487.pdf

the affected reference entity will be removed from the credit default basket. Premiums for both credit default options and credit default basket options are expressed in points and decimals. In order to obtain the aggregate premium for a single option, the quoted premium is multiplied by a pre- Mum multiplier specified by the listing options market. ADJUSTMENT OF CREDIT DEFAULT OPTIONS Adjustments may be made to the standardized terms of outstanding credit default options when certain events occur, such as a succession event or a redemption event, both of which will be defined by the listing options market in accordance with the terms of the reference obligations. Adjustments of credit default options will be within the sole discretion of the listing options market. Investors should familiarize themselves with the listing options market's rules and procedures governing credit default option adjust- ments. The listing option market's rules goveming adjust- ments of outstanding options may be changed with regula- tory approval, and the listing options market may have authority to make such exceptions as it deems appropriate to its general adjustment rules. Redemption Event Adjustments. A redemption event occurs when reference obligations of a reference entity are redeemed (or paid in lull) by, or on behalf of, the issuer. In the case of all types of credit default options, if only some of the reference obligations are redeemed, the option is ordinarily adjusted such that the remaining reference obligations are the reference obligations for the option and no other adjust- ment will ordinarily be made. If all of the reference obliga- tions of a reference entity are redeemed and there are other debt obligations of the reference entity that the listing options market deems appropriate to specify as successor reference obligations, then they will be substituted as the reference obligations. If. however, all of the reference obliga- tions of a reference entity are redeemed and there are no other debt obligations of the reference entity that the listing options market deems appropriate to specify as successor reference obligations for the reference entity (a complete redemption), then the adjustment will depend upon whether or not there are other reference entities for the options. Adiustment of credit default options for a complete redemption. If there is a complete redemption affecting a credit default option, the option will cease trading on the date that the redemption event is confirmed by the listing options market. Expiration of the option will be accelerated to a specified number of days following the confirmation date of the redemption, and the option will expire unexer- cised if, prior to such expiration, no credit event is confirmed to have occurred prior to the effective date of the redemption event. EXAMPLE: Company XYZ is the reference entity for a credit default option contract and its 8% May 15, 2022 bond issue is the only reference obfigation. During the life of the option. Company XYZ redeems the 8% May 15, 2022 bond issue and there are no other obligations of Company XYZ 117 CONFIDENTIAL - PURSUANT TOCRESCIR11OB;087878 P. 6(e) CONFIDENTIAL SDNY_GM_00184062 EFTA01353487