Swaps, Derivatives, and Financial Products Practice
Product Coverage:
Forwards
Futures
"Over-the-Counter" Options
Swaps
The Swaps, Derivatives and Financial Products Practice at Troutman Sanders is compromised of attorneys who have broad-ranging experience in the financial derivatives and products, familiarity with their underlying markets and extensive experience in structuring, documenting, negotiating and critically reviewing swaps and other derivative transactions, as well as forward and futures contracts and other financial products, and contractually allocating the underlying risks. We regularly counsel, work with and act on behalf of an array of clients domestically and abroad, including major financial institutions, energy companies, corporate end-users and high net worth individuals.
Documentation
We regularly function as our clients’ partners in structuring financial products. We have prepared, reviewed and customized countless ISDA® master forms (both 1992 and 2002) and proprietary form master agreements for all types of "over-the-counter" financial products (representing American, European and Asian interests), governed by both New York law and English law. These Transactions have included interest rate, currency, commodity, equity and credit default swaps, as well caps, options, forward contracts, fx purchases and swaptions and weather derivatives, as well as long-form swap confirmation agreements. In addition, we regularly review, analyze, negotiate and advise clients on agreements, term sheets and confirmations received from their trading counterparties. Our primarily focus is on ensuring enforceability and proper documentation of the commercial terms of financial transactions as confirmed in writing by our client’s trading counterparty. In doing so, we focus on correcting deal discrepancies and legal deficiencies in documents, noting credit, operational, accounting and business issues, and on conforming such documents to the client’s internal procedures and policies. We also are experts in all manner of security interests and the give and take of negotiated collateral arrangements.
Collateral and Margining
In support of the various documents prepared for financial derivative trading activities, Troutman Sanders has developed, negotiated, customized, and advised and are familiar with the a wide array of collateralization, securitization and margining agreements designed to facilitate the management of mark-to-market and accounts receivable risks inherent in financial derivative transactions. We similarly have dealt with all kinds of property as collateral and have been referred to as "weird collateral" experts. We have also assisted clients in developing their own proprietary forms of margin, support and credit documents. The firm also works on a daily basis with the varying types and forms of financial support agreements designed to expand or enhance the trading flexibility of often thinly–capitalized trading entities while only exposing the parent, guarantor, surety or issuer to readily quantifiable potential obligations.
Some dealers in financial derivatives have created proprietary margining procedures, annexes and the like to administer the mark-to-market exposure in "over-the-counter" derivatives products. In transactions with those dealers, we endeavor to help our client understand the risks in proprietary procedures or documents. We have negotiated the terms of supplementary documents with banks, escrow agents, affiliates of brokers or other Futures Commission Merchants to ease the administrative burden of margin calls. Here, our focus has most often been on simplifying, regulating frequency and transparency of, and to the extent possible limiting the cash flow obligations of our clients.
Industry Participant
Troutman Sanders is an active member of the International Swaps and Derivatives Association (ISDA), with full access to all ISDA publications, legal opinions and committee reports. Troutman Sanders’s attorneys serve on numerous ISDA working groups and committees, including its Equity Derivatives committee, Energy Products committee, Emissions Trading committee, European Energy, Commodities and Developing Products committee, as well as ISDA’s working group committees for Gas (both Europe and North America), Power (both Europe and North America), Freight and Coal, Oil (global), and Other Products. Through our ISDA membership, we are more able to provide precise advice on current issues affecting our clients.
We also are counsel to and active member of the European Federation of Energy Traders ("EFET"), with full access to all EFET publications, legal opinions and committee reports. We not only advise European and American clients with respect to EFET energy trading agreements and the various annexes thereto (including the collateral annex), but we also acted as counsel to EFET in their development of the EFET General Agreements Concerning the Delivery and Acceptance of Electricity and Natural Gas (the "EFET Master Agreements"). We have provided to EFET memoranda of law as to the enforceability of the early termination and close-out netting provisions of each of the EFET Master Agreements under the United States Bankruptcy Code, the Federal Deposit Insurance Act, the New York Banking Law and the Federal Deposit Insurance Corporation Improvement Act of 1991 in the event that a counterparty is in insolvency proceedings under such statutes.
Bankruptcy
The failure of several large financial institutions and investment banks have resulted in unprecedented action by governments around world giving rising to various close mechanisms across several industry standard agreements. Currently, we are counseling financial institutions and their subsidiaries, corporate end-users on their termination, netting and other close-out rights under their agreements.
Internal Risk Management and Compliance
The legal practitioners at Troutman Sanders have advised many different clients on the development and implementation of policies and procedures governing: (1) Ethics Codes, (2) Insider Trading, (3) Risk Management, Administration and Internal Controls, (4) Antitrust and Fair Competitive Practices, (5) Anti-Boycott and Foreign Corrupt Practice Act Requirements, (6) Counterparty Credit Management, (7) Standardization of Documents, (8) Contract Administration, and (9) Document Control and Retention. We also have provided clients with customized seminars and employee training on any and all of the above. Such development of internal procedures and codes of conduct have focused on energy and public company clients, but would be equally useful for others entering into all forms of financial derivative transactions. In addition to working on the front end in the development of internal policies, Troutman Sanders’ attorneys have aided clients in the task of auditing trading policies, activities and documentation currently being used. Such audits aid clients in following industry best practices in light of legal changes and current trends. We also have assisted financial institutions and others in the development of standardized documents.
Litigation
We have aided clients in dealing with litigation in the financial derivatives realm, ranging from antitrust issues with municipalities to bankruptcy issues to issues of contract law. We have also been engaged to resolve disputes over conflicting confirmations, the lack of a written confirmation and Statute of Frauds issues and differing interpretations of the commercial terms of transactions.
Regulation
On the regulatory front, we advise our clients with respect to securities law issues, the Investment Company Act and the Commodity Exchange Act, tax and ERISA issues and other applicable laws, rules and regulations in connection with the structuring and trading of derivatives.
Overview
Whether your company is a new entrant in the rapidly growing and complex financial derivatives or an established player in the financial markets looking to expand or diversify, the increasingly competitive and financial derivatives and products markets offer many opportunities, which are coupled with many risks and hazards. We have the experience to advise you in these areas today and to help you chart your course into the evolving future.