Derivatives

The derivatives world has always been one which continually evolves and embraces innovation and complexity. The unprecedented events of the past two years have thrown new challenges at all types of players in the derivatives space – not just dealing with major counterparty defaults, but also new approaches on collateral, re-assessment of credit terms and new industry initiatives such as central counterparty clearing for OTC derivatives.

Our service

We have been active in derivatives for over 20 years, an unusually long time in this young market, which has given our dedicated team of derivatives lawyers true depth of experience.

We cover all types of underlyings – fixed income, FX, inflation, equity, credit and commodities (including precious and base metals, energy and weather) – and, in addition to OTC derivatives, we advise on exchange-traded and securitised transactions as well as the central clearing of OTCs.

We advise our clients on master agreements – including ISDA, GMRA, GMSLA – and bespoke netting agreements, collateral agreements (including tri-party collateral arrangements) and on individual transaction confirmations

We additionally advise on policy, tax and regulatory issues, provide or review standard documentation and templates and carry out large projects such as intra-group transfers of OTC derivatives books.

Our experience

Our recent work reflects the dramatic events and changing trends in the derivatives market. Our flexibility and knowledge of this area means that we can meet our clients’ needs however demanding, complex and time-critical. Select examples of our recent activities include:

Collateral and Credit Support
We have been active for a number of clients in devising and implementing a series of solutions to protect collateral providers from credit exposure to their collateral receiver and to ensure access to the collateral is not restricted by the collateral receiver’s insolvency. We have also been advising many clients on their use of tri-party repo and stocklending arrangements.

Credit Derivatives
We have been advising on transactions such as credit-linked notes and total return swaps on emerging market debt, as well as on the settlement of credit default swaps after a credit event has occurred. Clients have also been seeking advice on industry initiatives such as ISDA’s ‘Big Bang’ and ‘Small Bang’ Protocols and central counterparty clearing of some CDS.

Close-outs
The insolvencies of the Lehman Brothers group and other entities have resulted in an unprecedented number of early terminations of ISDA Master Agreements, GMRAs, GMSLAs and other agreements. We have been helping a large number of clients manage the often complicated and time-critical close-out process, including default notice procedures, the approach to valuing terminated transactions, the enforcement of collateral and set-off issues.

Netting
Many regulated institutions are seeking to maximise the number of counterparties where they can report their exposure on a net basis. We have recently completed projects to review standard and specially-commissioned netting opinions for ISDA Master Agreements, CSAs, GMRAs and GMSLAs. We are regularly asked to commission netting opinions from jurisdictions not covered by the standard opinions (in Asia, Africa, Latin America) and to issue netting opinions on English entities outside the scope of the standard opinions (such as universities).

Regulated Funds
With the implementation of UCITS III, European retail funds are now able to invest and trade in derivatives, subject to regulatory restrictions. We have developed a marketleading practice in advising managers of UCITS III funds on both the regulatory framework for derivatives trading and the documentation solutions for complying with the FSA regulations. We have also advised investment banks on the specific provisions to be included in derivatives confirmations and master agreements for these types of entity.

Derivatives and Structured  Finance brochure