Post-Reform Guide to Derivatives and Futures

An in-depth look at the best ways to navigate the post-reform
world of derivatives and futures

The derivatives market is one of the largest, and most important
financial markets in the world. It's also one of the least
understood. Today we are witnessing the unprecedented reform and
reshaping of this market, and along with these events, the entire
life cycle of a derivatives transaction has been affected.
Accordingly, nearly all market participants in the modern economy
need to view the handling of risk by derivatives in a very
different way.

Many aspects of financial services reform are based on a belief
that derivatives caused the Great Recession of 2008. While the
difficulties we now face cannot be blamed solely on derivatives,
the need to understand this market, and the financial products that
trade within it, has never been greater. The Post-Reform Guide
to Derivatives and Futures provides straightforward
descriptions of these important investment products, the market in
which they trade, and the law that now, after July 16, 2011,
governs their use in America and creates challenges for investors
throughout the world. Author Gordon Peery is an attorney who works
exclusively in the derivatives markets and specializes in
derivatives and futures reform and market structure. Since
representing clients in Congressional hearings involving Enron
Corp., he has developed extensive experience in this field. With
this guide, he reveals how derivatives law, and market practice
throughout the world, began to change in historic ways beginning in
2011, and what you must do to keep up with these changes.

• Explains what derivatives and futures are, who trades them, and
  what must be done to manage risk in the post reform world

• Accurately reflects the futures and derivatives markets as they
  exist today and how they will be transformed by the Dodd-Frank Wall
  Street Reform and Consumer Protection Act

• Highlights the risks and common disputes regarding derivatives
  and futures, and offers recommendations for best practices in light
  of the evolving law governing derivatives

The financial crisis has changed the rules of Wall Street,
especially when it comes to derivatives and futures. The
Post-Reform Guide to Derivatives and Futures will help you
navigate this evolving field and put you in a better position to
make the most informed decisions within it.

Auteur

GORDON F. PEERY has lectured in London, Hong Kong, Toronto, Brunei, Kuala Lumpur, and the United States on the 2008 market crises and derivatives reform. Since representing a leading investment bank in televised Enron hearings in Congress, Mr. Peery developed a global legal practice exclusively devoted to derivatives and futures clients. In his seventeenth year in large firm legal practice, Mr. Peery is a partner who counsels governments, sovereign wealth funds, international investment advisors, states, counties, global investment management clients, funds, managed accounts, real estate firms, energy companies, and individuals as a leader within the Derivatives and Structured Products Practice of K&L Gates LLP, one of the ten largest law firms in the world. Mr. Peery has actively contributed to International Swaps and Derivatives Association, Inc. (ISDA) and the Futures Industry Association (FIA) working groups and has taught for ISDA. He has helped shape the next generation of derivatives and futures documentation and has authored or coauthored over thirty articles on derivatives and futures. He holds degrees from Vanderbilt Law School (JD, recipient of the endowed Bennett Douglas Bell Memorial Award) and the University of Southern California, where he graduated with a double-major, magna cum laude, as a member of Phi Beta Kappa.

Résumé
An in-depth look at the best ways to navigate the post-reform world of derivatives and futures The derivatives market is one of the largest, and most important financial markets in the world. It's also one of the least understood. Today we are witnessing the unprecedented reform and reshaping of this market, and along with these events, the entire life cycle of a derivatives transaction has been affected. Accordingly, nearly all market participants in the modern economy need to view the handling of risk by derivatives in a very different way.

Many aspects of financial services reform are based on a belief that derivatives caused the Great Recession of 2008. While the difficulties we now face cannot be blamed solely on derivatives, the need to understand this market, and the financial products that trade within it, has never been greater. The Post-Reform Guide to Derivatives and Futures provides straightforward descriptions of these important investment products, the market in which they trade, and the law that now, after July 16, 2011, governs their use in America and creates challenges for investors throughout the world. Author Gordon Peery is an attorney who works exclusively in the derivatives markets and specializes in derivatives and futures reform and market structure. Since representing clients in Congressional hearings involving Enron Corp., he has developed extensive experience in this field. With this guide, he reveals how derivatives law, and market practice throughout the world, began to change in historic ways beginning in 2011, and what you must do to keep up with these changes.

• Explains what derivatives and futures are, who trades them, and what must be done to manage risk in the post reform world
• Accurately reflects the futures and derivatives markets as they exist today and how they will be transformed by the Dodd-Frank Wall Street Reform and Consumer Protection Act
• Highlights the risks and common disputes regarding derivatives and futures, and offers recommendations for best practices in light of the evolving law governing derivatives
  The financial crisis has changed the rules of Wall Street, especially when it comes to derivatives and futures. The Post-Reform Guide to Derivatives and Futures will help you navigate this evolving field and put you in a better position to make the most informed decisions within it.

Contenu

Preface xiii

Acknowledgments xix

Introduction 1

Part One The Crises That Led to Derivatives Reform 15

Chapter 1 Seven Causes of the 2008 Market Crises 17

Ignoring the Warning Signs 18

More than Seven Causes of the 2008 Market Crises 20

An Incomplete Response to Problems Exposed in the Enron Bankruptcy 26

Enron Finance Used by Banks and the Lack of Regulation 29

The Absence of Effective Regulation 30

The Shadow Banking System 34

Development of an Unregulated Global Derivatives Market 39

The Rise of Credit Derivatives and the Credit Default Swap 44

Private-Label Residential Mortgage-Backed Securitization 45

U.S. Policy Fostering Home Ownership and

GSE Mismanagement 47

Derivatives and Structured Products Accounting Practices 49

Notes 52

Chapter 2 The Crises and Reform Timeline 55

March 17, 2008: Bear Stearns Is Sold 57

March 27, 2008: Barack Obama Introduces Reform Principles 58

September 15, 2008: A Bankrupt Lehman Brothers 59

November 2008 to January 2009: American Leadership Ascends 60

March 26, 2009: Geithner Provides Testimony to Congress on Reform 60

May 13, 2009: Geithner Writes a Letter to Harry Reid 61

June 2, 2009: An Early Voice Speaks Out against the Clearing Mandate 61

June 22, 2009: American Corporations Lobby against Central Clearing Mandates for OTC Derivatives 62

July 22, 2009: Introduction of Legislation Favoring Exemptions to the Clearing Mandate 62

July 30, 2009: Introduction of Broad Outlines of the New Law 63

September 8, 2009: The Industry Demonstrates Commitment to Centralized Clearing 63

October 2, 2009: House Release…