Derivatives

Exchange-Traded Derivatives

Our lawyers are strategically situated to create and enhance compliance programs for market participants trading futures, options, and swaps on derivatives exchanges. Our experience with the Dodd-Frank Act, EMIR, and Markets in Financial Instruments Directive (MiFID) enables us to assist clients with local and global compliance programs. We advise our clients on the compliance pitfalls associated with the most heavily enforced exchange rules such as disruptive trading, position limits, and block trades. We learn the business of our clients—commodity traders, banks, proprietary traders, and asset managers—to provide customized and practical guidance, whether in the form of compliance policies, compliance trainings tailored to our clients’ trading practices, or engagement with exchange market regulators on our clients’ behalf. 

In the United States in particular, our lawyers have a deep familiarity with the rules, disciplinary processes, and trading practices of the exchanges with the largest trading volume—CME and ICE—as well as the newest entrants to the market, swap execution facilities (SEFs), and security-based swap execution facilities (SBSEFs). 

Rounding out our exchange-trading practice, our lawyers across the globe also counsel derivatives exchanges located in a variety of jurisdictions. Whether registering an exchange (including debt capital markets (DCMs), SEFs, SBSEFs in the United States, or approved exchanges and recognized market operators in Singapore), creating and enhancing exchange compliance programs, drafting product listings and rulebook amendments, advising on reciprocity in foreign jurisdictions, or counseling non-US exchanges on offering products to clients within the United States, our derivatives and commodities team provides sophisticated and practical advice to derivatives exchanges across the world.

Commodity Trading

A key component of our Derivatives practice is a deep understanding of the physical commodities underlying derivatives markets. We advise some of the world’s largest companies on their trading activities in oil, gas, renewable products, metals, and grains. Whether our clients are hedging their pricing risk, receiving inquiries from CME or ICE, or building out their derivatives trading compliance programs, our practitioners provide tailored, practical solutions to these commercial end-user clients. We work hand in hand with our colleagues who advise clients on international trade, maritime law, project development, agribusiness, and renewable energy, providing a one-stop shop for our global commodity trading clients.

Investigations and Enforcement 

Our practitioners include former US attorneys, assistant US attorneys, prosecutors from the US Department of Justice headquarters (Main Justice), CFTC, and SEC enforcement lawyers who now shepherd clients through regulatory exams, inquiries, and investigations by those agencies, National Futures Association (NFA), Financial Industry Regulatory Authority (FINRA), and derivatives exchanges. Members of our Derivatives practice and White Collar Defense and Investigations practice have conducted internal investigations where appropriate and have effectively and persuasively defended clients before these regulators, relying on their deep knowledge of derivatives markets and rules to obtain positive outcomes in enforcement actions and disputes.

Asset Management

Working closely with the securities practitioners in our Asset Management and Investment Funds practice, our derivatives and commodities team counsels hedge funds, investment advisers, retirement plans, broker-dealers, futures commission merchants, swap dealers, registered investment companies, and other asset managers on the rules and regulations that apply to their derivatives trading activities. Our US lawyers are well versed in the CFTC and NFA rules and regulations applicable to each of these market participants, and we frequently advise on commodity pool operator (CPO) and commodity trading advisor (CTA) registration requirements and exemptions. These clients rely on our practitioners to structure and negotiate a variety of transactions, such as swaps, TBA investments, repurchase and reverse repurchase agreements, securities lending agreements, and master securities forward transaction agreements. We regularly advise our asset management clients in connection with complex structured products and synthetic investments. Our lawyers counsel a range of buy-side clients, including private funds, registered investment companies, insurance companies, and state treasurers’ offices on both regulatory and transactional matters.

Registered Entities and Exemptions From Registration

We work with market participants to analyze whether registration with the CFTC, FCA, local European regulator, or MAS is required. Brokers, investment advisers, DeFi protocols, technology providers, and other intermediaries and platforms rely on our deep experience guiding derivatives and commodity market participants on the registration requirements and exemptions that may be applicable. 

In particular, we advise our asset management clients on the CFTC’s commodity pool operator and commodity trading advisor registration requirements, and the potential exemptions or regulatory relief that may be available. We also work with market participants in emerging areas—such as digital assets and decentralized finance—to interpret how existing laws and regulations apply to these novel structures and transactions.

Swaps and Security-Based Swaps

We regularly negotiate International Swaps and Derivatives Association (ISDA) Master Agreements and related documentation, including Credit Support Annexes that are compliant with various margin regulatory regimes. We have experience in negotiating these contracts in a variety of asset classes, including interest rates, equities, commodities, FX, and digital assets. Our lawyers counsel swap market participants on the Dodd-Frank Act, European Market Infrastructure Regulation (EMIR), and other jurisdictions’ swap regulations. 

Unlike other jurisdictions, the US derivatives regulatory regime is divided between two federal regulators—the CFTC and the SEC. Our team helps clients navigate the complex jurisdictional divide in the United States between swaps that are regulated by the CFTC, security-based swaps that are regulated by the SEC, and mixed swaps that are regulated by both agencies.

With respect to security-based swaps, our practitioners draw from the deep securities experience at our firm and from our relationships with key staff members at the SEC to advise our clients on all applicable regulatory requirements, including uncleared swap margin, Regulation SBSR, and registering security-based swap execution facilities with the SEC.

We also advise clients in relation to the special bankruptcy treatment of swaps and other qualified financial contracts under a variety of regimes, including the Bankruptcy Code, the Federal Deposit Insurance Act, and the Orderly Liquidation Authority created by the Dodd-Frank Act.

Emerging Asset Classes and The Future of Finance

In addition to our robust traditional finance offerings, our team counsels clients on a variety of novel products, business ventures, and trading platforms with evolving legal frameworks. Relying on our depth of experience in commodities, securities, and derivatives laws and regulations, our practitioners provide strategic guidance and practical solutions related to digital assets, carbon credits, artificial intelligence, decentralized finance, and other cutting-edge concepts and technologies that represent the future of finance. 

SEC Treasury Clearing 

Our lawyers work with market participants on all aspects of Treasury securities clearing. We assist trade associations with commenting on the Fixed Income Clearing Corporation’s (FICC) newly proposed rules, helping clients evaluate whether they should establish new legal entities and apply for FICC clearing membership, and helping buyside clients in understanding the regulatory context and documentation requirements of cleared cash and repo Treasuries. Our depth of knowledge of this asset class and the related regulatory frameworks enables clients to make informed decisions to achieve their business goals. In addition, our team helps clients enter into the necessary counterparty documentation to allow them to clear Treasury securities when the mandate comes into effect.