Covington’s Derivatives practice advises clients on the full range of transactional, regulatory and compliance matters in the derivatives markets. We regularly advise on a wide range of products, including derivatives hedging exposures to equities, credit, energy, commodities, interest rates and currencies (both deliverable and non-deliverable), as well as exchange-traded derivatives, futures and options and complex, bespoke structured transactions utilizing derivatives. Clients include financial institutions acting as dealers and a wide spectrum of end-users (including corporates, pension funds and private equity/hedge funds).
The Derivatives markets are undergoing a complete restructuring pursuant to Title VII of Dodd-Frank. As a result of the financial crisis, Dodd-Frank mandates a shift from a market characterized primarily by bilaterally-negotiated transactional and collateral documentation to a market based to a significant extent upon exchange trading of certain derivatives products, with a continuation of the bilateral model (modified significantly) for other products. Covington lawyers have been at the forefront of these developments. Our practice includes Julian Hammar, who recently joined the firm after a thirteen-year career at the CFTC, served as Assistant General Counsel and took the lead role in the drafting and adoption of the product definition rules recently adopted by the Commission. Bruce Bennett, the co-chair of the firm’s Securities & Capital Markets practice, also regularly advises on Derivatives transactional and regulatory matters.
We regularly appear in front of CFTC Commissioners and staff as well as in front of the SEC, Treasury and other regulators relevant to these markets to advocate positions relating to the myriad regulations being proposed and adopted pursuant to the mandate under Dodd-Frank. We also advise clients, both domestic and offshore, on the optimal structuring of their business operations in light of the changes to these markets.
Energy derivatives are another area in which we have extensive experience. Members of the firm’s Energy Regulation practice work closely with our Derivatives practice in this area. Additionally, our Employee Benefits & Executive Compensation practice works closely with our Derivatives practice to advise a number of pension funds (both ERISA plans and Government plans) on their derivatives activities. We also advise clients on the ongoing development of regulation of the derivatives markets in Europe.
In addition to having a detailed knowledge of ISDA documentation, particularly from an end-user point of view, we regularly advise clients on the following types of arrangements:
- Segregated third-party collateral arrangements
- Securities lending
- Master repurchase agreements
- Prime brokerage and related give-up agreements
- Inter-affiliate derivative structuring for corporate treasury functions
- Counterparty risk management and insolvency issues
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