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The TCFD Roadmap unfolds

It is no longer news by now that after 35 years as a mainstay of the financial markets, LIBOR is to be discontinued, with the majority of tenors and currencies scheduled to be published for the last time on 31 December 2021.

The government is consulting on the design of a new tax, on residential property developers to help fund the removal of unsafe cladding following the Grenfell Tower fire tragedy. The idea is to raise at least £2bn over a decade.

UK counterparties to derivatives transactions should note that there is an upcoming filing deadline under UK EMIR.

The European Market Infrastructure Regulation (EMIR) sets out the requirements for the central clearing of standardised OTC derivatives, the exchange of collateral, post-trade reporting to trade repositories and risk mitigation procedures for non-cleared derivatives. The requirements apply to many stakeholders in the OTC derivatives market in the EU and, prior to Brexit and the expiry of the Brexit transition period, applied to stakeholders in the UK.

Here you will find our series of bite-size guides to derivatives, directed at trustees alone.

Trustees are generally given wide powers of investment in the scheme rules, often expressed to afford trustees the same powers to invest scheme assets as though such assets were owned by the trustees themselves (with certain restrictions, either in the scheme rules or in legislation).

The International Swaps and Derivatives Association, Inc is the global trade association for OTC derivatives and maintains the industry standard documents for such transactions, namely the 2002 or 1992 Master Agreement, Schedule and credit support documents (the ISDA). 

What are derivatives?

Derivatives are contracts between two parties where the value of that contract derives from an underlying asset referenced by the contract. This explains why there is a lot of jargon around certain types of derivatives but once you break them down, most derivatives contracts are not particularly complex.

A large and growing part of our practice is advising DB pension scheme trustees on investment matters. Trustees are under increasing pressure to de-risk, especially with the requirement (in the Pension Schemes Act 2021) for trustees to set a long-term funding and investment strategy.

• Agency ISDA: an ISDA negotiated and agreed by an investment manager with a particular counterparty bank which forms a kind of 'umbrella' arrangement applicable to the investment manager's different clients. The Agency ISDA will contain appendices outlining the specific legal and commercial terms which apply to the derivatives transactions the investment manager enters into on behalf of different stakeholders across its entire client book, e.g.

Schemes that have been using fiduciary management services for some time may face a 9 June 2021 deadline for putting those services out to tender or retender. Other schemes already using such services are subject to later deadlines.

To help you keep on top of legal developments relevant to alternative asset managers, we have created a checklist that pulls the key ones together. Our checklist highlights each development, providing a brief description and setting out the next steps.

Of particular interest to many parties will be the cessation of 26 of the 35 LIBOR benchmark tenors immediately after 31 December 2021.

The recommendations of Lord Hill's UK Listing Review were published yesterday, 3 March. The review, which was launched in November 2020, considers the efficiency, attractiveness, and competitiveness of the post-Brexit UK Listing Regime.

Updated 2 September 2021

Our round-up of recent developments in law and practice for in-house counsel.