Documenting Swaps and other OTC Derivatives

4 days 23-26 Apr 2018, London UK £4,195.00 + VAT* Download brochure Add to basket
4 days 10-13 Dec 2018, London UK £4,195.00 + VAT* Download brochure Add to basket

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Swaps and derivatives have become a vital tool in risk management and structured financings and are used by an ever-increasing number of banks, financial institutions and corporations. From the basic swap structure a wide range of complex instruments have developed.

Swaps are legally complex and have been the cause of major litigation. To protect all the parties involved, transactions must be properly documented. Lawyers and documentation staff need to understand both the products, the legal issues and effective documentation techniques.

This course will provide you with an in-depth analysis of the role of, and the critical legal issues relating to, OTC derivatives in the financial markets. We will do a detailed clause-by-clause analysis of the 1992 and 2002 ISDA® Master Agreements, including a discussion on the implications for derivatives in the financial crisis.

You will learn:

  • What swaps are and how they work
  • Understanding the Master Agreement
  • The significance of every clause in the Agreement
  • How to complete the Schedule to the documentation
  • How to draft clauses to meet special situations
  • How to deal with insolvency and close-out netting
  • The risks in credit exposure and techniques for credit enhancement
  • How to assess the capacity of the counterparty
  • The significance of major swaps litigation
  • Complimentary documentation

Course fees include copies of the following publications, purchased on delegates' behalf from ISDA:

  • 2002 ISDA Master Agreement (Multicurrency-Cross Border)
  • 1996 ISDA Credit Support Annex (Transfer-English Law)

This course are neither endorsed by, nor affiliated with, ISDA. ISDA is a registered trade mark of the International Swaps and Derivatives Association.
This course is an objective and impartial analysis of ISDA documentation


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.

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.



Central London Hotel Venue

All courses are held at four or five star venues in Central London, Zone 1. We strive to provide you with a training environment of the highest quality, to ensure that the whole learning experience exceeds your expectations.

Your training venue will be confirmed by one of our course administrators approximately 3-4 weeks before the course start date.

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Day 1

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
  • Hybrid securities
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
Netting and Insolvency Issues
  • Principles of insolvency
  • Netting: payment and close-out
  • Summary of US and UK insolvency issues
  • Enron: MARTA
  • Lehman Brothers; Metavante
Capacity and Authority
  • Hammersmith & Fulham, Piraeus and Korea Life
  • Resolutions
  • Signatories
  • Funds and other special counterparties
  • Minmetals
  • Regulation overview
  • Are swaps:
     - Securities?
     - Illegal off-exchange futures?
     - Gaming contracts?
     - Insurance contracts?
  • Caiola
  • Capital: Basle and Basel II Accords
  • The new regulatory framework
The US Dodd-Frank Act
  • Overview
  • Derivatives
  • Effect on Europe
  • Bankers Trust Cases
  • Cases: Kwiatkowski, Korea Life, Eternity, Caiola, PowTel/SunTrust and Peekay
  • Single bank loan/swap cases
  • CDO cases
  • Nonreliance representations
  • Direct tax in another jurisdiction
  • Withholding tax
  • ISDA structure
  • FAS 133
  • IAS 39

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: 1977-2011
  • Architecture of documents
  • Fitting together the ISDA components
  • One master for all products/Offices?
  • Oral trades, confirmations and confirmation process
  • Backlogs
  • 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
  • Nuova Safim, ANZ/Societe Generale, Peregrine I and II, TXU/Enron, High Risk, Marine/Pioneer and Brysons
ISDA® Master Agreement
  • Sections 5-6 continued
  • Termination Workshop
Day 3
Default Checklist
  • Steps to take on counterparty’s default
ISDA® Master Agreement: section 7
  • Concepts
  • ISDA® forms
    – Novation protocol
  • Negotiated terminations
  • Section 7: Workshop
ISDA® Master Agreement: sections 8-14
Completing the Schedule
Credit Enhancement
  • Guarantees
  • Collateral
  • Rehypothecation
  • Partial?
ISDA Credit Support Documents
  • CSA
  • Disputes

Day 4

Master Agreement Workshop

Break into small groups - each with a
statement of a party's policy regarding
the ISDA 2002 Master Agreement.
Each group:

  • Completes first draft of a Schedule to the ISDA 2002 Master Agreement
  • Reviews & responds to other group’s draft
  • Negotiates final draft with the other group
The Developments: Standardisation
  • 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
  • Duration
  • Give-up and compensation agreements
The Credit Crunch, Its Causes and Its Uses
  • US real estate, CDOs
  • AIG
CCPs: Structural Analysis
  • Formal incorporation and regulation
  • Risk committee
  • Documentation
  • Relationships: who is your counterparty?
  • Margining
  • Guaranty fund
Case Studies
  • ICE
  • LCH.Clearnet
  • CME
  • Lack of flexibility
  • Oligopoly
  • Concentration of risk
  • Legal jurisdiction
  • Liquidity
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