<p>Filter Knowledge</p>

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.

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

Finance Partners Peter Hughes and Joseph Wren and Senior Associate Vanessa Kalijnikoff Battaglia have written a chapter for Global Legal Insights on some of the key structural and documentary legal issues that should be considered by private capital managers.

As the dust settles on the EU–UK Trade and Cooperation Agreement, and the majority of businesses have returned after a break of some kind at the end of 2020, the end of the Brexit Transition Period means that UK (and some EU and EEA) users of derivatives find themselves in a new regulatory environment.

The TCFD (Task Force on Climate-related Financial Disclosures) has launched a consultation on the development and use of forward-looking climate-related metrics by the financial sector.

Collective experience has illustrated how impactful periods of volatility in foreign exchange rates can be for managers of funds with currency exposures. Such exposures can arise as a result of a multi-jurisdictional investor base, cross border transactions or assets held in underlying portfolios which are denominated in a different currency to the base currency of the fund.

This briefing was updated on 3 March 2021.

This chapter was first published in the International Comparative Guide to Derivatives, First Edition. In addition to this chapter, Travers Smith acted as the contributing editor to this practical cross-border insight into derivatives.

This chapter was first published in the International Comparative Guide to Derivatives, First Edition. In addition to this chapter, Travers Smith acted as the contributing editor to this practical cross-border insight into derivatives.

This week will bring new developments in respect of EMIR 2.1. Certain firms will need to re-calculate their positions in over-the-counter (OTC) derivatives to reassess their classification under EMIR.

The ever increasing restrictions on movement and forced physical closures of businesses as a result of COVID-19 are a serious challenge to businesses. Understanding the risks in each part of your business is key to ensuring continuity in times of severe disruption like this.

The GLI to: Fund Finance 2020 covers legal trends and developments in the greater fund finance markets providing law firms, financial institutions, funds and investors with a comprehensive insight. Chapter 3, Derivatives at fund level, was written by Finance partner Peter Hughes and senior associates Vanessa Kalijnikoff Battaglia and Joseph Wren.