Legal Derivatives School

Euromoney Training and this course are neither endorsed by nor affiliated with ISDA® Since 1990, Euromoney Training, in association with Schuyler K Henderson, has organised this highly successful course on the legal concepts in derivatives and the documentation of derivatives transactions using the ISDA® Master Agreement. 'Legal Derivatives School' is presented in a modular format. You are recommended to attend full modules or you can contact us at training@euromoneyasia.com to book separate modules (required to book at least two days). Module 1: Swaps and Other OTC Derivatives – Legal Issues and Documentation 27-28 October 2014, Singapore Module 2: Equity and Credit Derivatives - Legal Issues and Documentation 29 October 2014, Singapore Module 3: Legal Issues in Derivatives Linked to Loans, Structured Notes and Structured Issuers 30 October 2014, Singapore Module 4: The Dodd-Frank Act, EU Derivatives Regulation and Central Counterparties 31 October 2014, Singapore Course overview Swaps and derivatives have become more and more complex every year, and have come under close regulatory scrutiny. Products such as credit derivatives and equity derivatives and the use of derivatives in financing structures pose particularly interesting and significant issues. New laws and regulations are changing the practices and conventions of the OTC derivatives market. The advanced modules of this course focus on these issues and are specifically designed for delegates who have mastered the basic issues but are facing the challenges of these new and complicated applications. As the range of users and applications of swaps and derivatives increase, so the legal and documentation problems become more difficult and require ever-more sophisticated techniques. This 5-day School fully explains the legal aspects of swaps and derivatives and derivatives in structured financing. You will gain a complete understanding of the key legal issues in swap documentation, and in particular the important problems of default, insolvency and enforcement. Summary of course content Gain essential hands on experience of documenting swaps and other derivatives Perform intensive and objective analysis of 1992 and 2002 ISDA® Master Agreements, 2002 ISDA® equity derivatives definitions and 2003 ISDA® credit derivatives definitions, and related master agreement confirmations Protect your organisation against potential problem areas such as default, capacity, insolvency, inforcement, regulation and tax Learn to structure agreement “fixes” to ISDA® Agreements Understand the principles of derivatives in structured financings Learn about new credit derivative developments: Determination Committees and Auctions Learn about prime brokers, central counterparties and the new derivatives regime in the US and Europe Who should attend this training course? In-house lawyers in banks and securities houses Bankers involved in complex financings using swaps and derivatives Senior documentation staff Compliance officers Lawyers in private practice Bankers who want to know more about legal issues Accountants who have to document and advise on swap transactions Lawyers with corporations and fund houses Lawyers working for corporations, governments and financial institutions Lawyers and accountants in private practice who advise clients on the above categories Course fee: US$3,850/person for any two days US$4,990/person for any three days US$6,150/person for any four days US$6,800/person for all five days ISDA® is a registered trademark of the International Swaps and Derivatives Association
Module 1 - Swaps and Other OTC Derivatives – Legal Issues and Documentation The derivatives markets and their uses The markets Definitions The tensions and key concepts Description and uses of basic derivatives structures Swaps Fully-paid transactions Hybrid securities Derivatives risk Legal and operational risk Position or market risk Valuation and hedge risk Delivery risk Long term exposure: Rate 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 Cases: Enron: MARTA Lehman Brothers; Metavante and English cases Capacity and authority Cases: Hammersmith & Fulham, Piraeus and Korea Life Resolutions Signatories Funds and other special counterparties Case: Minmetals Regulation Regulation overview Suitability and misrepresentation Tax Direct tax in another jurisdiction Withholding tax HIRE Protocol FATCA: A new global risk ISDA® structure Accounting FAS 133 IAS 39 Need for documentation and functional analysis Financial provisions: Confirmations and definition booklets Legal, credit and trading relationship: Master agreement Evolution of documentation: 1977- 2011 Architecture of documents Fitting together the ISDA components One master for all products/ offices? Confirmations Oral trades, confirmations and confirmation process Backlogs Electronic confirmations Confirmation worksho 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 Cases: Nuova Safim, ANZ/Societe Generale, High Risk, Peregrine I and II, TXU/Enron, Marine/ Pioneer and Brysons ISDA® Master Agreement: Section 7 Concepts ISDA® forms Novation Protocol Negotiated terminations ISDA® Master Agreement: Section 8-14 Completing the schedule Credit enhancement Guarantees Collateral Rehypothecation Partial ISDA® Credit Support Documents CSAs Disputes Module 2 - Equity and Credit Derivatives – Legal Issues and Documentation Equity derivatives: The market and products The market Forms and uses Other uses Equity-funding deposit swap Takeover legislation Case: Perry Employee offering Case: Marconi Equity share derivatives Equity index derivatives 2002 ISDA® equity derivatives definitions Products; the dealing market Trading (hedge disruptions) Index events Extraordinary events (mergers, recapitalizations, etc) Fallbacks Knock-in/out events additional disruption events; hedging issues Calculation agent; determining party Additional representations and acknowledgements Master equity derivatives confirmation agreements 2011 ISDA® equity derivatives definitions Modular approach Structure Main book Appendix Transaction Matrix T-Supp (confirmation) Drafting devices Legs Primary features Swap Option Forward Underliers Exchanges Days and dates Scheduled etc Market disruption events Pricing and settlement Extraordinary events Additional disruption events Cancellation amount Calculation dispute resolution procedure Barrier features Knock-in/out prices Credit derivatives Overview of market Default swaps Baskets: Leverage or diversification Uses Hedging Investment Capital reduction Physical and cash settlement 2003 ISDA® credit derivatives definitions – overview Reference entity Credit events (obligations and credit event): Issues Physical and cash settlement: Issues Dealing market choices: Compromise; standard Indexes 2009 ISDA® protocols and fundamental changes Lookbacks and pricing Determination committees Auctions Module 3 - Legal Issues in Derivatives Linked to Loans, Structured Notes and Structured Issuers Derivatives linked to investments and loans Price arbitrage Asset swaps Bond issues Change rate basis of loan Currency option built into loan Project financing Common threads Principles of structured derivatives Tricks Embedded derivatives: Principal protected/unprotected Issuing vehicles: Programme issuers, SPVs and rating agencies Caveats: Recharacterisation and reputational risks Structured notes Indexed security; tracker bonds/ certificates of deposit Reverse floaters and PERLS: Embedded swap Leverage Credit linked notes: Embedded credit default swap Broad selections Exposures Case study workshop: Deconstructing complex notes Common issues Calculation agent Prohibited transactions Hedging and self-dealing Disclosure Tax issues Structured issuers SPV issues Credit supplied independent of originator Rating agency requirements Case: Enron structures Monetized put and call: Deferred sale of securities Hedge issues Transformer companies Repackaging: Yield enhanced note based on asset swaps Clean, yield-enhance note; complexity at issuer level Credit issues Synthetic securitisation CMOs, CLOs, CBOs and CDOs “Traditional” vs. synthetic securitisation - considerations Risk transfer mechanisms Credit loss determination Allocation of losses Documentation issues Issues in relation to the ISDA® Master Agreement Rating agency requirements Termination close-out calculations: Default or external illegality or tax Commonly overlooked issues Programme issuers: Note payments on an unanticipated early termination? Commonly overlooked exposures Suitability and misrepresentation Transparency of pricing, hedge risk and liquidity Cases: Bankers Trust cases, Kwiatkowski, Caiola, Eternity, Korea Life PERLS and Puglisi Springwell and SunTrust/ PowTel Peekay Enron related lawsuits and administrative proceedings Reputational issues FSA: Treating customers fairly EU: “Producer” liability and pricing disclosure New US proposals Asian issues Module 4 - The Dodd-Frank Act, EU Derivatives Regulation and Central Counterparties Key developments pre-2008: 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 financial crisis of 2008 What caused it? US real estate Asset-backed securities CDOs Fannie Mae and Freddie Mac Modelling and rating agencies Banks: Moral hazard The non-role of derivatives AIG FP The visceral response The Dodd-Frank Act Overview Jurisdictional responsibilities New regulatory entities with overlapping jurisdiction CFTC and/or SEC registration requirements Derivative clearing organizations The swap-pushout Risk management and prudential requirements The Volcker Rule Business conduct rules and duties towards “victim” class; whistleblowers Application to foreign banks and US subsidiaries of foreign entities The rules CFTC SEC Insert ISDA August Protocol Dealers'response to Dodd-Frank Banking regulation Jurisdictional responsibilities Substantive changes European regulation Background EU level vs. National supervisors Emerging regulation Basel III Integration with regulatory schemes Central Counterparties (CCPs) Europe US CCP: Structural case studies Formal incorporation and regulation Risk committee Documentation Relationships: Who is your counterparty? Margining Guaranty funds Cases: ICE LCH.Clearnet CM Issues Lack of flexibility Oligopoly Concentration of risk Legal jurisdiction Liquidity Questions and recap This course is an objective and impartial analysis of ISDA® documentation.