Financial Products, Trading & Derivatives

McDermott Will & Emery has deep 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, 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, Dodd-Frank compliance, Sarbanes-Oxley compliance, derivatives controls and policies, documentation of trading, financing and funding activities, bankruptcy and insolvency issues, and legislative representation. We are working with our clients to help them understand the implications of Dodd-Frank on their activities.

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. We are actively involved in Dodd-Frank implementation and compliance matters. 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.

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 participate in negotiations on behalf of domestic and off-shore insurance companies, hedge funds and other counterparties.

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, and market-making activities, especially given Dodd-Frank changes. 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 negotiate and document securities lending agreements, repurchase agreements and prime brokerage relationships to provide our clients with flexibility and certainty for their funding agreements. We also negotiate trust documents, clearing addenda to over-the-counter derivative transactions, guarantees, letter of credit facilities, margin lockups, ISDA Master Agreements, netting agreements and other financial transactions.

We have an active hedge fund practice. Our hedge fund clients are of varying sizes, use a wide variety of trading strategies, and are at all stages of business development. We have worked with clients to renegotiate trading relationships as part of conversions into the fund-of-funds structure. We work with them on acquisitions and divestures of business lines and investments.

We frequently develop model term sheets and negotiate documentation of trading relationships, including prime brokerage agreements, prime brokerage lockup arrangements, ISDA Master Agreements, master netting agreements, futures and options agreements, securities lending agreements, Master Repurchase Agreements and master confirmations. We have negotiated with every major bank, investment bank and derivatives dealer. With the start of Dodd-Frank implementation, we are working with our clients to address considerations for clearing relationships.

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 10b5-1 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 products 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, 3,800-page work that is in its third edition and is kept current with annual supplements. Building on this unique knowledge, 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 work closely with the IRS and the U.S. Treasury Department on the scope and content of a wide range of financial product regulatory projects and policy matters. We have 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 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, Europe and Asia, and we conduct 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, energy trading activities, oil and gas exploration and development contracts, and the implementation of derivatives and trading policies and procedures. We conduct multi-day training courses in-house for a wide range of trading companies and derivatives users.