Financial Products, Trading & Derivatives

McDermott Will & Emery LLP has unparalleled experience in the design, trading and use of structured products, derivative financial products, and synthetic derivatives. We represent our clients in connection with all types of financial products, ranging from standardized exchange-traded instruments to highly complex, and rapidly evolving, over-the-counter products that have experienced explosive growth in recent years. We provide a full range of legal services with respect to derivatives, including tax planning and defense, transactional representation, regulatory counseling and advocacy, Sarbanes-Oxley compliance, derivatives controls and policies, documentation of trading, financing and funding activities, bankruptcy and insolvency issues, and legislative representation.

Given our broad experience in the structure, taxation and regulation of the financial markets, we design and advise our clients on structured product and derivative transactions, to assure they are in compliance with all corporate governance, legal, regulatory, and tax requirements. In advising our clients in regulated industries—such as energy companies, banks, financial institutions, pension funds, and insurance companies—we work with them on the regulations and restrictions that apply to their use and issuance of derivative products. Several of our colleagues were lawyers or officers at federal regulatory agencies including the SEC, CFTC, and IRS, allowing us to provide our clients with informed insight concerning the legal authority, positions, policies, and procedures of those agencies.

We work with issuers, dealers, investors, traders, arbitrageurs, and hedgers. Our clients include major corporations and financial institutions, hedge fund complexes, banks, insurance companies, pension funds, cooperatives and agribusinesses, securities and commodities trading firms, energy trading firms and utilities, derivatives dealers, and derivatives end-users.

We handle issues with respect to exchange-traded futures and options, including brokerage arrangements, exchange memberships, compliance programs, customer documentation, disclosure requirements, and fund management. We also address the processing of derivative products, including clearing, settlement, netting arrangements and market-making activities. We advise leading investment banks, commercial banks, derivative trading companies, hedge funds, and exchanges on the structuring of new products in view of the legal, regulatory, tax, and documentation issues.

We work with our clients to negotiate and document interest rate, foreign currency, credit, equity, energy, catastrophe, and weather derivatives transactions and trading operations. We also negotiate and document stock leading agreements, repurchase agreements, and prime brokerage relationships to provide our clients with flexibility and certainty for their funding agreements.

We also negotiate all necessary documents, including trust documents, letter of credit facilities, prime brokerage agreements, margin lockups, stock lending agreements, repurchase agreements, ISDA Master Agreements, netting agreements, and other financial transactions.

We have an active and broad-ranging hedge fund practice. Our hedge fund clients are of varying sizes, using a wide variety of trading strategies, and at all stages of business development. Our clients include a fund complex that has been in business since 1994, manages assets in excess of $6 billion, and has investments all over the world. In September of 2005, we assisted with the launch of a new fund that holds assets in excess of $1.5 billion. In early 2006, we worked with an $8 billion hedge fund complex to renegotiate trading relationships as a conversion into a fund-of-funds structure. We frequently develop model term sheets and negotiate documentation of trading relationships, including prime brokerage agreements, ISDA Master Agreements, futures and options agreements, Master Repurchase Agreements, and master confirmations. We have negotiated with every major bank, investment bank, and derivatives dealer. We also have considerable expertise in the negotiation of specialized hedge fund products,
such as prime brokerage lockup arrangements, master netting agreements, and other agreements to assure advantageous financial arrangements. We also negotiate and document customized, structured derivative transactions.

Because of our Firm’s extensive wealth management and executive compensation practices, we advise financial institutions, family offices, individual investors, insiders, and corporate employees on equity derivative transactions, including short against the box transactions, collars, variable forward contracts, draw down forward contracts, equity swap strategies, and synthetic equity transactions. We address relevant tax and securities law considerations. We advise our clients on 10(b)(5)-1 plans and the use of derivatives to effectuate these plans.

We work with our clients to structure special purpose entities and securitization vehicles for a wide-range of structured products and derivatives. With the continuing convergence of the capital markets and the insurance industry, we advise our clients with respect to distinctions between insurance and derivative products.

One of our partners wrote the only treatise on the taxation, regulation, and design of financial products. The treatise is a three volume, 3800 page work that is in its third edition and is kept current with annual supplements. Building on this unique expertise, our partner worked in the legislative area, to conceive and draft the legislative language that was enacted to change the tax treatment of exchange-traded options. We have also conceived and drafted legislative language to obtain clarification and simplification of the taxation of business assets and the scope of tax hedging activities. In audits tax and litigation matters, we represent our clients when their tax positions are questioned or challenged by the IRS.

We have worked closely with the IRS and the Treasury Department on the scope and content of a wide range of financial product regulatory projects and policy matters. We maintain an extensive network of contacts at federal and state regulators across the country. Our comments and public testimony have been instrumental in assisting the government in its efforts to modernize the taxation of hedging transactions, commodity derivatives dealers, the tax market to market rules, and “notional principal contracts.” In addition, We have conducted financial product training sessions for the IRS and Treasury.

We develop and conduct full day workshops across the United States and Webcast seminars on the tax treatment of financial products, the tax treatment of foreign currency transactions; the negotiation and documentation of swap transactions; the use and documentation of credit derivatives; the competition law issues for energy trading activities; and the implementation of derivatives and trading policies and procedures. We also conduct multi day training courses, in house, for a wide range of trading companies and derivatives users.