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.
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
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
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
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.
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.
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.
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).
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