Course dates
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 can choose to attend the comprehensive course (recommended) which runs from 19-23 March 2012, or pick from the following modules:
Module 1: Legal and Documentary Issues in Swaps and other OTC Derivatives
19-20 March 2012
Module 2: Documenting Equity Derivatives
21 March 2012
Module 3: Credit Derivatives – Legal Issues and Documentation
22 March 2012
Module 4: Legal Issues in Derivatives and Structured Notes, Prime Brokers and Central Counterparties
23 March 2012
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 credit derivatives definitions, and related master confirmations
- Protect your organisation against potential problem areas such as default, capacity, insolvency,
enforcement, 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, auctions and central counterparties
Who should attend this training course?
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In-house lawyers in banks and securities houses
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Bankers involved in complex financings using swaps and derivatives
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Senior documentation staff
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Compliance officers
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Lawyers in private practice
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Bankers who want to know more about legal issues
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Accountants who have to document and advise on swap transactions
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Lawyers with corporations and fund houses
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Lawyers working for corporations, governments and financial institutions
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Lawyers and accountants in private practice who advise clients on the above categories
ISDA® is a registered trademark of the International Swaps and Derivatives Association
Supporting publication
19 March
The derivatives markets and their uses
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 risk and performance risk
- Quantification of risk
Netting and insolvency issues
- Principles of insolvency
- Netting: payment and close-out
- Lessons from Enron and Lehman Brothers
Capacity and authority
- Capacity
- Hammersmith and Fulham, Piraeus and Korea Life
- Resolutions and signatories
- Minmetals
Regulation
- Regulation overview
- Are derivatives:
- Securities?
- Illegal off-exchange futures?
- Gaming contracts?
- Insurance contracts?
- Capital adequacy requirements
- Suitability/misrepresentation
- Bankers trust cases
- Kwiatkowski, Eternity, Caiola and Korea Life; PowerTel
- The new US regulatory regime
Tax and accounting issues
- Direct taxation in another jurisdiction
- Withholding tax
- ISDA® structure
- FASB and IASB: effect on end-users and dealers
Need for documentation, ISDA® structure and choice of one or more masters
- Avoiding uncertainty
- Financial provisions: definition booklets
- Legal, trading and credit provisions; master agreement
- Evolution of ISDA® documentation: 1977-2007
- Architecture of documents
- Fitting together the ISDA® components
- One master for all products/offices?
Confirmations
- Oral trades, confirmations and confirmation process; backlogs
- Confirmation workshop
20 March
ISDA® master agreement
ISDA® master agreement
- Sections 5-6
- Grounds and procedures for termination
- How to calculate close-out values
- Soc Gen v ANZ, Nuova Safim and Peregrine; high risk and Peregrine II
Voluntary terminations and section 7 transfers
- Section 7
- ISDA® forms
- Negotiated terminations
ISDA® master agreement
Credit enhancement
21 March
Equity derivative products
- Options, swaps and forwards
- Portfolio swap
- Equity-funding deposit swap
- Other uses: Perry; Marconi; Enron; "parking" own stock
2002 equity derivatives definitions: overview
- Prior forms
- Topics
- User's guide
Options
Forwards
- Prepayment
- Variable obligation
Swaps
- Price return
- Total return
Barrier features
Settlement
- Settlement method election
- Cash
- Valuation
- Averaging dates
- Disruption days
- Physical
- Settlement disruption
- Multi-jurisdictional issues
Adjustments and extraordinary events
- Index adjustments
- Merger event and tender offer
- Nationalisation, insolvency and delisting
- Consequences
Additional disruption events
- Description
- Cancellation and payment
Confirmations and process
- Regional master equity derivatives confirmation agreements
22 March
Description of credit derivatives market
- Scope and size
- Participants
- Significance
- Tensions
Credit derivatives: the legal structure
- Swap
- Option
- Embedded security (credit-linked notes)
- Transaction types: default products, total return swaps, yield products
- Payment: Price differential, physical delivery, total rate of return, credit spread, agreed amount
Uses and risks
- Buyer of protection
- Seller of protection
- Dealing instrument
- Basis risk issues
- Are you getting what you think you are getting?
Documentation structure and issues
Detailed analysis of 2003 ISDA® credit derivatives definitions
- Reference entity
- Credit events and obligations
- Cash settlement
- Physical settlement and deliverable obligations
Confirmations and special transactions
- The "standard" confirmation
- Other standard forms
- Backlogs
- Master credit derivatives confirmation agreements
- Reference entities
- Types of deal
- Types of reference obligation
- Credit indices (CDX, iTRAXX, LCDX)
- Secured loans (LCDS)
Recent litigation
Selected legal issues
- Close-out netting with other derivatives
- Insurance issues
- Disclosure under securities laws
- Gaming issues
- Withholding tax
Capital
- Use of credit derivatives to reduce capital requirements
- Basel II
The "Big" and "Small" Bangs
- Determination Committees
- Auction process
Central counterparties
- Structures
- Margin
- Agreements
23 March
Description of derivatives
- Overview of the OTC derivatives markets
- Form: swap, option and forward
- Optionality
- Present value; marking-to-market, marking to model
- Dealers and end-users
- Hedge issues
- Standardization; liquidity
Principles of structured derivatives
- Tricks
- Indexed security
- Currency option built into loan
- Embedded derivatives: principal protected/unprotected
- Issuing vehicles: programme issuers and SPEs
Structured notes
- Reverse floaters: embedded swap
- Leverage
- Credit linked notes: embedded credit default swap
- Broad selections
- Inflation derivatives
- 2006 Inflation Derivatives Definitions
Case study workshop
- deconstructing complex notes
Common issues
- Calculation agent
- Prohibited transactions
- Hedging and self-dealing
- Disclosure
- Tax issues
- Programme issuers: note payments on an unanticipated early termination?
- Commonly overlooked exposures
Structured issuers
- SPE issues
- Credit supplied independent of originator
- Rating agency requirements
- Enron structures
- Monetized put and call: deferred sale of securities
- Hedge issues
- Transformer companies
- Repackaging: yield enhanced note based on asset swaps
- Clean, yield-enhanced note; complexity at issuer level
- Credit issues
Synthetic securitisation
- "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
Suitability and misrepresentation
Transparency of pricing
Hedge risk
Liquidity
Bankers trust cases, Kwiatkowski, Caiola, Eternity, Korea Life
PERLS and Puglisi
PowTel and Peekay
Enron related lawsuits and administrative proceedings
Reputational issues
Structured notes: interface between retail and wholesale markets
This course is an objective and impartial analysis of ISDA® documentation.
InterContinental Grand Stanford Hotel, Hong Kong, Hong Kong
This programme takes place on a non-residential basis at the InterContinental Grand Stanford Hotel. Non-residential 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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Schuyler K Henderson
Schuyler K. Henderson is one of the leading International Financial Lawyers. Since 1977 he has been resident in London, during which time he has represented numerous international financial institutions in the full range of credit extensions, including syndicated lending, letter of credit and guarantee facilities, secured financings, shipping and aircraft financings, securities issuances and derivatives. He has been particularly active in the derivatives market, having acted for one of the participants in the first currency exchange agreement in1977. Since then he has been actively involved in the creation of innovative financial products on behalf of over fifty financial institutions, and is generally regarded as one of the leading derivatives lawyers.
His practice has regularly included: developing new products; structuring, drafting and negotiating complex financings, including repackagings, credit-linked securities and tax or regulatory driven 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; provision of regulatory, enforcement and tax advice in respect of over 30 jurisdictions; enforcement of derivatives documentation: representation of parties in disputes involving derivatives; and establishment of derivatives dealers in a number of jurisdictions.
Schuyler is the author of numerous publications on financial topics, and is a member of the Editorial Advisory Board of Butterworths Journal of International Banking and Financial Law. He is a regular speaker and chairman at various conferences on international finance in many international financial centres. He is the author of Henderson on Derivatives (LexisNexis 2003).
Courses run by this instructor
Interested in holding this course in-house? Please fill out your details and a member of our team will be in touch with more information.
Course dates