Derivatives

LEADERS

Overview

Gibson, Dunn & Crutcher stands out as one of the preeminent law firms with the knowledge, experience, and talent to serve all the derivatives-related needs of its clients—both in the United States and abroad. The lawyers in Gibson Dunn’s Derivatives Group have a combination of government and industry experience that is unmatched in the derivatives space, enabling our team to provide clients with guidance about the policy and political trends impacting the derivatives industry, as well as the nuts and bolts issues arising in their day-to-day operations.

A wide range of clients continually call on our Derivatives Group for assistance relating to derivatives, including complex regulatory analysis, advocacy before regulatory agencies and legislators, commercial transactions, handling Commodity Futures Trading Commission (CFTC) enforcement matters, defending private actions brought under the Commodity Exchange Act (CEA), challenging agency rulemakings, and advising on the impact of global regulatory changes. These diverse clients include financial institutions, commercial end-users, investment funds, trade associations, and market service providers.

As a global firm, we are able to offer our clients a strong international team with the experience, local knowledge, and resources to navigate and address their derivatives issues around the world. We provide a full range of services to our clients in the global derivatives markets, from general updates on derivatives regulation in the United States, Europe, and the Asia-Pacific region to assisting with advocacy before non-U.S. regulators.

REGULATORY AND POLICY

In the derivatives regulatory and policy space, we have a unique understanding of the structures, politics, processes, and players at the relevant regulatory agencies (e.g., the CFTC, the Securities and Exchange Commission (SEC), and the prudential banking regulators) as a result of our prior agency experience and government service.

Our lawyers have developed key relationships with CFTC and SEC Commissioners, agency staff, members of Congress, congressional staff, as well as European regulators and policy makers. These relationships have been developed through years of working with regulators and policymakers and through their prior government experience, including holding senior positions at the CFTC, the SEC, in the U.S. Senate and House of Representatives, and the White House. These relationships enable our lawyers to make discrete inquiries and obtain staff guidance on behalf of our clients.

Our Derivatives Group:

  • brings extensive experience in advising clients on both exchange-traded and over-the-counter derivatives, their markets, and the regulatory oversight regime;
  • utilizes institutional knowledge of processes and interpretations at the CFTC, SEC and federal banking regulators;
  • maintains key relationships with CFTC and SEC Commissioners, agency staff, members of Congress, congressional staff, as well as European regulators and policy makers;
  • routinely advises on the prudential requirements of the federal banking regulators, including, the Volcker Rule, capital and liquidity requirements, and resolution planning;
  • understands and tracks the web of U.S. and international derivatives regulations, including their effects on cross-border and multinational entities;
  • brings first-hand knowledge of the challenges that registrants face in implementing, building and maintaining compliance frameworks in conformance with derivatives regulations;
  • advises financial institutions on the insolvency treatment of specific arrangements and entities in connection with netting and collateral opinions;
  • regularly represents clients before the CFTC, SEC, federal banking regulators, and European regulators; and
  • develops and implements strategies for achieving policy objectives.

LEGAL CHALLENGES TO AGENCY ACTIONS

Gibson Dunn’s renowned Administrative Law and Regulatory Practice Group has routinely and successfully challenged some of the most consequential agency actions of the federal government, including rulemakings by the CFTC and SEC. The Derivatives Group works closely with the Administrative Law and Regulatory Practice Group in analyzing and challenging agency actions and regulations involving derivatives—from rulemakings to enforcement. For example, in International Swaps & Derivatives Association and Securities Industry & Financial Markets Association v. CFTC, we successfully challenged the CFTC’s rule imposing position limits on 28 commodities, which resulted in the U.S. District Court for the District of Columbia vacating the rule on the ground that the CFTC had erroneously interpreted the CEA. Similarly, in Securities Industry & Financial Markets Association v. CFTC, we successfully challenged the CFTC’s cross-border rule.

TRANSACTIONAL ADVICE

The Derivatives Group’s transactional derivatives expertise covers the full range of over-the-counter and exchange-traded products, including equity derivatives, credit and total return products, commodity, interest rate and foreign exchange hedges, including deal-contingent forward transactions, credit- and equity-linked securities issuances, and convertible and exchangeable note transactions. In the equity derivatives space, the Derivatives Group has extensive experience in equity collar structures, total return swaps, accelerated share repurchase transactions, share forward transactions and options, call spread and capped call transactions relating to convertible notes and various hybrid structures, among others. We also have significant experience in securities repo transactions and stock lending arrangements.

Our transactional representations have covered not only transaction structuring, negotiation, documentation and execution, but also ongoing legal risk management and enforcement, including defaults and close-outs, and regulatory-inquiry response on a domestic and cross-border basis. We regularly interact with our clients’ treasury, operations, and accounting departments to ensure proper and practical procedures around complex derivatives transactions. Our work has involved not only established products and structures, but also includes helping clients design

CFTC ENFORCEMENT & PARALLEL INVESTIGATIONS

The Derivatives Group has substantial experience handling CFTC enforcement investigations and actions. Our team also conducts internal investigations and root cause analyses for companies regulated by the CFTC, and it assists those companies with regulatory compliance and remediation. Over the years, our team has represented clients in some of the most high-profile enforcement initiatives conducted by the CFTC, including investigations and enforcement actions involving the alleged false reporting and manipulation of LIBOR and other benchmarks, the manipulation of foreign exchange rates, spoofing, swap reporting violations, the manipulation of precious metals futures, and other various forms of alleged disruptive trading practices.

In recent years, companies involved in CFTC investigations often face parallel investigations conducted by the U.S. Department of Justice (DOJ), SEC, Federal Energy Regulatory Commission (FERC), and foreign regulators. The Derivatives Group routinely handles multi-faceted, parallel investigations—working closely with the Firm’s White Collar Defense, Securities Enforcement, and Energy Regulation and Litigation Groups. We staff these matters with cross-disciplinary teams that not only bring a keen understanding of exchange-traded and OTC derivatives and physical commodity products, but also have decades of experience working in high-level positions for regulators and law enforcement agencies such as the CFTC, DOJ, SEC, FERC, and the UK’s Financial Conduct Authority (FCA). The Firm’s global presence enables us to provide clients with cross-border teams that seamlessly coordinate in responding to multi-national investigations.

PRIVATE LITIGATION

CFTC enforcement actions often spawn class actions and stand-alone private actions brought under the CEA. When it comes to private litigation arising from alleged violations of the CEA and related theories, the depth and breadth of our derivatives litigators’ expertise ensures that every case—from complex class actions to stand-alone matters and parallel proceedings—is approached with a comprehensive strategy from the outset that draws upon our team’s strengths across multiple practice areas. We are able to leverage our team’s wide-ranging skills to custom tailor a defense for any situation. Our award-winning Class Actions, Appellate and Constitutional Law, Antitrust, Administrative Law and Regulatory, Energy Litigation, and Securities Litigation Groups regularly work together to craft a multi-disciplinary approach that anticipates issues early and best positions our clients for success. These synergies make our team especially effective in defending cases involving alleged manipulation of commodities markets, and, in particular, highly complex cases where plaintiffs allege manipulation of the prices of exchange-traded and over-the-counter derivatives and other complex financial instruments.

We have achieved numerous significant victories for clients in private CEA cases, including, for example, a full dismissal of claims against our client, a large investment bank, in the high-profile class actions alleging manipulation of the gold, silver, platinum, and palladium financial benchmarks, and the dismissal of multiple CEA claims and the rejection of certification in the sprawling class actions alleging manipulation of LIBOR and other international interest rate benchmarks. We similarly twice defeated CEA and antitrust actions against another client, a major transnational energy company, alleging manipulation of natural gas trading prices.

RECENT PUBLICATIONS

Digital Asset Developments: U.S. Commodity Futures Trading Commission Asserts That Tether Is a Commodity

-October 20, 2021

The U.S. Comptroller of the Currency Nominee and Her Writings: What They Mean for Banks and Fintechs

-September 27, 2021

New York Adopts LIBOR Legislation

-April 8, 2021

The End Is Near: LIBOR Cessation Dates Formally Announced

-March 9, 2021

Cryptocurrency Developments: Office of Foreign Assets Control’s Recent Enforcement Cases Against Digital Asset Firms

-February 24, 2021

The Biden Administration: New Priorities in the Banking, Fintech and Derivatives Sectors

-February 16, 2021

Virtual Currency/Fintech Update: OCC Approves Anchorage Trust’s Charter Conversion and Expands the General Fiduciary Powers of National Banks

-January 25, 2021

What the CFTC’s Settlement with Vitol Inc. Portends about Enforcement Trends

-January 20, 2021

Proposal to Publish LIBOR Beyond 2021

-December 1, 2020

CFTC Division of Enforcement Issues New Guidance Regarding the Recognition of Cooperation, Self-Reporting, and Remediation in Enforcement Orders

-November 30, 2020

European Market Infrastructure Regulation for Derivatives End-Users – A Shift in Responsibility for Reporting

-June 12, 2020

CFTC Issues Proposed Rule on Speculative Position Limits on Derivatives

-March 2, 2020

CFTC Divisions Release No-Action Relief Related to LIBOR Transition: Summary and Analysis

-January 14, 2020

Brexit – Reporting of Derivatives under EMIR

-December 10, 2019

Treasury Releases Guidance on the Transition from LIBOR to Other Reference Rates

-October 15, 2019

Dodd-Frank 2.0: U.S. Agencies Revise the Volcker Rule on Proprietary Trading

-September 9, 2019

EMIR Refit Enters into Force on June 17, 2019 – Impacts and Action Items for End-Users

-June 5, 2019

Impact of CFTC’s Proposed Amendments to Swap Data Reporting Requirements on Reporting and Non-Reporting Counterparties

-May 16, 2019

Derivatives End-User’s Guide to the QFC Resolution Stay Requirements

-December 7, 2018

Financing Arrangements and Documentation: Considerations Ahead of Brexit

-October 11, 2018

The Commodities Activities of Banks: Comments on the Federal Reserve’s Notice of Proposed Rulemaking Reveal Key Concerns and Divides

-April 28, 2017