M1:  Swaps & Other OTC Derivatives: Legal Issues & Documentation

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Overview

This course represents module 1 of the Legal Derivatives School.

Instructors

We work with a series of expert instructors, please select the course location of interest to review the credentials of who will be delivering the programme.

Singapore
Schuyler K Henderson
Schuyler K. Henderson, author of 'Henderson on Derivatives', is one of the leading international derivative lawyers. Since 1977 he has been resident in London, during which he has represented numerous international financial institutions in the full range of credit extensions. He has been particularly active in he derivatives market, having acted for one of the participants in the first publicised currency exchange agreement in 1977.

Since then he has been actively involved in the creation of innovative financial products on behalf of over fifty financial institutions. His practice has regularly included: developing new products; structuring, drafting and negotiating complex financings, including repackagings, credit-linked securities and tax or regulatory drive structured transactions; preparation of standard form ISDA® documentation (including for use with specialised counterparties and confirmation templates for virtually all types of derivatives); supervision of backlog documentation and establishment of derivatives dealers in a number of jurisdictions, provision of regulatory, enforcement and tax advice in respect of over 30 jurisdictions; enforcement of
derivatives documentation and representation of parties in disputes involving derivatives.

Since retiring he has continued to consult, lecture and write on derivatives. Schuyler is the author of numerous publications on financial topics, and is a member of the Editorial Advisory Board of The Law and Financial Markets Review. He is a regular speaker and chairman at various conferences on international finance in many international financial centres.

Venue

Singapore

4-5 Star Hotel in Singapore

All of our courses are held in 4 – 5 star hotels, chosen for their location, facilities and level of service. You can be assured of a comfortable, convenient learning environment throughout the duration of the course.

Due to the variation in delegate numbers, we will send confirmation of the venue to you approximately 2 weeks before the start of the course. Course fees include training facilities, documentation, lunches and refreshments for the duration of the programme. Delegates are responsible for arranging their own accommodation, however, a list of convenient hotels (many at specially negotiated rates) is available upon registration.

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Agenda
Day 1 



Introduction and Welcome

The Derivatives Markets and Their Uses 

  • The markets 
  • Definitions 
  • The tensions and key concepts 

Description and Uses of Basic Derivative Structures 

  • Swaps 
  • Fully-paid transactions 


Derivatives Risk 

  • Legal and operational risk 
  • Position or market risk 
    - Valuation and hedge risks 
  • Delivery risk 
  • Long term exposure: rate risk and performance risk 
  • Quantification of credit risk 

Close-out Netting and Insolvency Issues 

  • Summary of US and UK insolvency issues 
  • Enron: MARTA 
  • Lehman Brothers; Metavante and English cases 

Capacity and Authority 

  • Hammersmith & Fulham, Piraeus 
  • Resolutions 
  • Signatories 
  • Funds and other special counterparties 



Regulation 

  • Regulation overview 
  • Capital: Basle and Basel II Accords; Basel III 


Tax 

  • Direct tax in another jurisdiction 
  • Withholding tax 
  • ISDA structure 
  • HIRE Act and FATCA 


Accounting 

  • FAS 133 
  • IFRS 9 


 


Day 2 



Introduction: Need for Documentation and Functional Analysis 

  • Avoiding uncertainty 
  • Financial provisions: confirmations and definition booklets 
  • Legal, credit and trading relationship: master agreement 



ISDA Agreements and Other Derivatives Documentation 

  • Overview 
  • Evolution of documentation: 1977-2017 
  • Architecture of documents 
  • Fitting together the ISDA components 
  • One master for all products/Offices? 


 Confirmations 

  • Oral trades, confirmations and confirmation process 
  • Backlogs 
  • Electronic confirmations 
  • Trading platforms 
  • 2005/6 Fed initiative 


 Confirmation Workshop 

  • Prepare an interest rate swap confirmation 


 
ISDA Master Agreement (provision-by-provision) 

  • Sections 1-4 


 ISDA Master Agreement 

  • Sections 5-6 
    - Grounds and procedures for termination 
    - How to calculate close-out values 
  • Drexel, Nuova Safim, ANZ/Societe Generale, High Risk, Peregrine I and II, TXU/Enron, Marine/Pioneer, Firth Rixson, Oppenheim and Brysons 



 ISDA Master Agreement 

  • Sections 5-6 continued 


 

ISDA Master Agreement: Section 7 

  • Concepts 
  • ISDA forms 
    - Novation Protocol 
  • Negotiated terminations 


 ISDA Master Agreement: Sections 8-14 

  • Branch and multi-branch issues 
  • Notice issues 
  • ISDA Arbitration Guidelines

 

  

 

Day 3

 

Suitability/Misrepresentation 

  • Bankers Trust Cases 
  • Cases: Kwiatkowski, Eternity, PowTel/SunTrust 
  • Nonreliance representations and disclosure documents 

 Credit Enhancement 

  • Guarantees 
  • Collateral 
  • Rehypothecation 
  • Partial? 


ISDA Credit Support Documents 

  • CSA 
  • SCSAs 
  • Disputes 



 Key Developments prior to 2008 

  • Dealer dominance 
  • Transaction facilitators: DTCC, Markit, Creditex 
  • Master confirmation agreements 
  • The 2005 Fed initiative and its aftermath 
  • The credit default swap market: indices and protocols 
  • Electronic platforms 


 Prime Brokers 

  • Description and issues 
  • Give-up and compensation agreements 


 The Credit Crunch, Its Causes and Its Uses 

  • US real estate, CDOs 
  • AIG 

 

The Impact of Dodd-Frank and EMIR on Asian Counterparties 

  • Summary of Dodd-Frank and EMIR 
  • Status and representations 
  • Margin requirments 


 CCPs: Structural Case Studies 

  • Formal incorporation and regulation 
  • Risk committee 
  • Documentation 
  • Relationships: who is your counterparty? 
  • Margining 
  • Guaranty fund 

 

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