Markets and Trading

Once you have set up your fund, how do you deploy your capital? How much leverage do you use? What are the legal implications of your trading strategy?

Our markets and trading group prides itself on its knowledge of market practices and laws in different jurisdictions. Our clients actively trade in all asset classes across the world, both cash and derivatives, using a variety of strategies – arbitrage, leverage and plain vanilla investment. Our lawyers have deep and wide experience of interpreting such strategies and negotiating the trading documents necessary to support them, from simple working capital lines and repo facilities to bespoke prime brokerage lock-up agreements and total return swap facilities. We stand ready with timely guidance on the regulatory issues that routinely arise in such contexts, interacting with traders as well as legal and compliance personnel.

Whatever type of fund you are – a hedge fund or a private equity fund; a university endowment or a sovereign wealth fund; a state or international pension fund or a single family office – you can rest assured that we adhere to one unchanging rule: We represent only the buy-side. We understand your sensitivities and objectives, and we will help you face the Street from a position of strength. Our approach ensures that we advocate for our clients in a way that is completely aligned to their interests and uncompromised by any conflict.

Our practice broadly splits into two areas – cash markets and derivatives markets.

Cash Markets

Trading in the cash markets rests on a series of agreements between a fund and each of its prime brokers to facilitate trading, settlement, custody and margin arrangements between the parties. Each broker uses its own proprietary agreement forms, and it is important to review and negotiate the documentation carefully to avoid overreach and hidden tripwires and to ensure you have a solid legal foundation for your trading operations.

Click here for examples of typical agreements that we negotiate for our clients.
  • Prime Brokerage Agreements
  • Lockup Agreements
  • Master Repurchase Agreements / Global Master Repurchase Agreements
  • Master Securities Lending Agreements
  • Master Securities Forward Transaction Agreements
  • Sweep Services Agreements
  • Administrative Services Agreements
  • Custody Agreements
  • Loan Facilities (including Master Repurchase Agreement facilities)
  • Marketplace lending financing facilities
  • Operational Credit Facilities
  • Working Capital Facilities
  • Capital Commitment Lines of Credit
  • Subscription Financing Facilities
  • Note Programs
  • Collateralized Loan Obligation Warehouse Facilities
  • Appraisal Rights financing facilities
  • General Terms of Business
  • Confidentiality Agreements
  • Electronic Trading Agreement
  • Data and Licensing Agreements
  • Research Services Agreements
  • Vendor Agreements

Active trading in the cash markets inevitably gives rise to a steady stream of legal and regulatory questions under the Securities and Exchange Act of 1934 and other applicable regulations, dealing with a wide range of issues, from beneficial ownership rules to limitations on short selling. Lawyers in our markets and trading group are on call to provide the trading desk with guidance and advice whenever it is needed.

Click here for examples of typical regulatory and legal issues on which we advise.
  • Applicability of Sections 13D and 13G of the Exchange Act
  • Applicability of Section 16 of the Exchange Act, including preparation of Forms 3 and 4 and advice regarding short swing profit determinations
  • Insider trading and material non-public information
  • Short selling rules
  • Cross trades
  • Implications of Basel 3, specifically, the introduction of the new liquidity coverage ratio and net stable funding ratio in different jurisdictions
  • Tax issues affecting the trading of derivatives in the global markets
  • Data protection/cybersecurity regimes
  • FINRA Rules 4210 (margin), 5130 (new issues – restricted persons) and 5131 (new issues – covered persons)
  • Benchmark reform (reform of LIBOR and related reference rates)
  • New bankruptcy risks emerging from the introduction of special resolution regimes for banks, including customer protection issues in connection with various custody arrangements
  • Commodity Pool Operator/Commodity Trading Advisor registration issues
  • CFTC Position Limits
  • EMIR/MIFID regulatory obligations
  • The implications of Brexit

Derivatives and Structured Products

In an asset class where innovation and change are a constant and market practice idiosyncratic, we are particularly proud of the role we play as counsel of choice for the buy-side of the investment community in the derivatives market.

Click here for examples of typical agreements or transactions that we negotiate for our clients.
  • ISDA Master Agreements, including Credit Support Annexes
  • Futures and other Over-the-Counter Cleared Derivatives Customer Agreements
  • Loan/Bond Total Return Swap Financing Facilities
  • Municipal Bond Total Return Swap Facilities
  • Cleared Derivatives Execution Agreements for US and European Clearing
  • Interest Rate Swaps, Caps and Swaptions
  • Deliverable and Non-Deliverable Currency Swaps
  • Vanilla and Exotic Currency Options
  • FX Volatility Swaps
  • Commodity Swaps and Options
  • Commodity Variance and Volatility Swaps
  • Index and Share Equity Swaps
  • Index and Share Vanilla and Exotic Equity Options
  • Index and Share Equity Variance and Volatility Swaps
  • Conditional Equity Variance Swaps
  • Equity Dispersion Volatility Swaps
  • Equity Correlation Swaps
  • Corridor Variance Swaps
  • Government Bond Options
  • Convertible Bond Swaps
  • ASCOTs
  • Fund Interest Variance Swaps
  • Onboarding documentation for swap execution facilities (SEFs), multi-lateral trading facilities and organized trading facilities
  • Master Netting Agreements
  • Complex tri-party collateral arrangements
  • Strategic hedging transactions

New regulations in this market have been very significant following the financial crisis in 2008. Through active participation in numerous industry working groups established by the International Swaps and Derivatives Association (“ISDA”), we’ve been staunch advocates in advancing the buy-side’s interests on a wide range of issues that have emerged as a result, including the new margin requirements for uncleared derivatives and the establishment of formal market polling procedures. We speak regularly at conferences and ensure that we remain abreast of all changes that have an impact on our clients’ businesses.

Click here for examples of typical regulatory and legal issues on which we advise and the working groups on which we participate.
  • The initial margin and variation margin regimes for uncleared swaps. We are members of the ISDA Working Group for Margin Requirements Legal and Documentation committee addressing the implementation of these regimes across the globe
  • The 2011 convention on Portfolio Reconciliation and the Investigation of Disputed Margin Calls and the 2011 Formal Market Polling Procedure
  • Reporting regimes for trading
  • Registration requirements including the CFTC regimes for commodity pool operators and commodity trading advisors and major swap participants
  • New conduct of business rules for derivatives in the US and Europe including adherence to the ISDA Dodd Frank Protocol and the ISDA Port Rec, Dispute Res and Disclosure Protocol
  • The 2011 ISDA Equity Derivatives Definitions
  • The ISDA Equity Steering Committee
  • The introduction of the 2014 ISDA Credit Derivatives Definitions
  • In the credit derivatives market:
    • The development of the auction mechanism and the ISDA Credit Derivatives Determinations Committee
    • Issues relating to credit events and succession events, both potential and actual, as well as the obligations which can be delivered as a result
  • New market structures for swaps including trading platforms and clearing houses and reporting and record-keeping regimes
  • The development of standard agreements for swap execution facilities

Key Contacts

View Professionals