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Derivatives and ISDA Documentation

Day One

Legal Implications of Derivatives

ISDA Documentation

  • The ISDA
  • Architecture of the ISDA documentation
  • Long form confirmation
  • ISDA Protocols
    • Protocol documentation

Workshop: Making amendments to ISDA documentation

  • ISDA Definitions

Workshop: Debriefing the ISDA definitions

Pertinent Issues

  • Mark to market valuations and netting
    • Insolvency
    • Section 6(e)
  • Early termination and events of default
    • Steps to be taken
    • Commercial considerations
    • Netting legal opinions
  • Tax
    • Legal tax opinions
    • Tax representations and undertakings
    • Tax event
  • Counterparty issues
    • Legal capacity
    • Limitations in constitutional documents

Netting and Valuation

  • Settlement netting
  • Close-out netting
  • Calculations
  • Mark-to-market valuations – How swaps are valued

Day Two

ISDA Master Agreement

Detailed Clause-by-clause Review (2002)

  • Single agreement
    • Cherry picking
  • Netting legal opinions
    • Governing law on insolvency
  • Conditions precedent
  • Withholding tax
  • Representations
  • Undertakings
  • Events of default
  • Termination events
  • Early termination
  • Transfer
  • Multi-branch parties
  • Waiver of immunity
    • Arbitration clauses

Negotiating Points Relating to an ISDA Master Agreement and Schedule

  • Detailed analysis of the ISDA schedule
  • Understanding the definitions used in ISDA schedules and how these impact negotiation
  • Considerations to bear in mind when negotiating an ISDA – detailed handout provided

Workshop: Drafting and negotiating the ISDA Schedule to the 2002 ISDA Master Agreement in accordance with the client instructions provided in the case study pack

Schedule to ISDA Master Agreement

  • EMIR related amendments
  • Relevant EMIR protocols
    • 2013 EMIR Non-Financial Counterparty Representation
    • 2013 Reporting Protocol
    • 2013 EMIR Portfolio Reconciliation, Dispute Resolution and Disclosure Protocol
    • Suggested EMIR related amendments

ISDA Confirmation

  • Process on how trades are done
  • EMIR reporting
    • 2013 EMIR Reporting Protocol
    • Grey area

Comparison of ISDA 2002 and 1992 Master Agreements

  • Events of default provisions
    • Grace periods
    • Scope of the credit support default
    • Breach of agreement
    • Specified Transactions
    • Cross default provisions
    • Merger without assumption
  • Termination events
    • Scope of illegality
    • Force majeure
    • Grace periods
    • Tax event upon merger
  • Methodology of calculating payments on early termination
    • First method
    • Second method
    • Market quotation
    • Loss
    • Set-off
    • Unpaid amounts
    • Close-out amount

Day Three

ISDA Credit Support Annexes and Credit Support Deeds

  • Legal opinions
  • English law deeds and annexes
  • New York law annexes
  • 1995 ISDA Credit Support Annex – Paragraph 11
  • Close-out netting
  • Valuation agent
  • Eligible credit support
  • Haircuts and valuation percentages
  • ISDA 2014 Collateral Agreement Negative Interest Protocol

Financial Collateral Regulations

  • Title transfer
  • Ring fencing
  • Close-out netting on insolvency

Workshop: Negotiating the 1995 ISDA Credit Support Annex

Events of Default and Termination Events

Workshop: Creating a timeline of events and considerations upon early termination

  • Steps to follow on early termination
  • Conditions precedent
  • Summary of process
  • Checklists
    • Contractual terms breach
    • Events of default and termination events
    • Legal, commercial and operational considerations
    • Early termination procedures

Case Law

  • Hammersmith & Fulham
  • Credit Suisse International vs. Stichting Vestia Groep

The Regulations

EMIR

  • Purpose
    • Increase stability
    • Standardization
    • Risk mitigation
  • Scope of EMIR
    • Counterparties
    • CCPs
    • Trade repositories
    • Exemptions
  • Outline of obligations imposed
  • Clearing obligation
    • Reporting obligation
    • Risk mitigation requirements
    • The Clearing obligation – What products are covered

Workshop: Implementation of EMIR

Margin Requirements for Uncleared OTC Derivatives

  • BCBS-IOSCO Policy Framework
  • Key Principles
  • Which Entities are Affected
  • New Margining Requirements
  • 2016 ISDA Variation Margin Protocol
  • ISDA SIMM™ Model

Section 2(a)(iii)

  • Lomas and others vs. JFB Firth Rixson Inc. and others
  • ISDA Amendment

US Reforms

  • Dodd Frank Act
    • Title VII
    • US Person
  • FATCA
    • Information reporting
    • Withholding tax
    • Affected parties
    • Payments affected in derivatives trades

ISDA® is a registered trade mark of the International Swaps and Derivatives Association, Inc. This programme is neither sponsored by nor affiliated with the International Swaps and Derivatives Association, Inc.



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