buy-side use of derivatives

By Stephen A. Keen and Andrew P. Cross

This post continues our examination of how a fund must treat hedges when calculating its derivatives exposure to qualify as a limited derivatives user. Commenters on proposed Rule 18f-4 suggested several types of derivatives hedges, in addition to currency derivatives, that the Commission might exclude from

In Episode 4 of our Podcast Series, Todd Zerega and Andrew Cross discuss the use of derivatives on cryptocurrencies by institutional investors. Specific attention is given to regulatory and product development considerations for registered investment advisors and fund sponsors, as well as technical considerations related to exchange-traded futures on bitcoin and other similar listed

I. DERIVATIVES ISSUES

1. Inventory “relationship level” considerations in legal documentation that governs your derivatives trading relationships (ISDA Master Agreements, Futures Customer Agreements, Master Securities Forward Transaction Agreements, etc.)

a. Example: Decline in Net Asset Value Provisions (Common in ISDAs)

i. Identify the trigger decline levels and time frames at which transactions under the agreement can be terminated (25% over a 1-month period – is that measured on a rolling basis or by reference to the prior month’s end?)

ii. Confirm whether all or only some transactions can be terminated (typically, it is all transactions)

iii. Identify the notice requirements that apply when a threshold is crossed

iv. Identify whether the agreement includes a “fish or cut bait clause” that restricts the ability of the other party to designate the termination of the transactions under the trading agreementContinue Reading Market Volatility Regulatory Outline for Asset Managers

ISDA recently published the results of a survey that it conducted to identify key issues and trends for the buy-side, derivatives end-user community.  The results are fascinating and, we blelieve, accurately reflect the experiences of many market participants and professionals that are involved in the over-the-counter (OTC) derivatives markets.  The following is a brief summary