It was when Deepak Sitlani, a partner with Linklaters, was attending the ISDA Annual General Meeting, held this April in Miami, that he realised the breadth of the company’s global derivatives practice.
ISDA CEO Scott O’Malia started his keynote speech by outlining the major projects that the trade body was focusing on — Brexit, Libor replacements, initial margin requirements. Linklaters, thought Sitlani, was providing counsel to ISDA on each and every high-profile project listed.
“We have been fortunate to be working with ISDA a lot more recently, which has led to us being more visible in the market,” says Sitlani.
“We have acted for ISDA from a number of offices in our network — in the UK, the US, Japan, Hong Kong and most recently we have been appointed as netting counsel in Germany.”
Linklaters — and Sitlani himself — have been leading the market in the work being undertaken to find a replacement for Libor.
ISDA was asked by the Financial Stability Board to take the lead on addressing the market transition to alternative benchmark rates ahead of Libor’s anticipated discontinuation by the end of 2021. ISDA then appointed Linklaters to work on the legal aspects.
Much progress has already been made including the recommendation of the Alternative Reference Rates Committee (ARRC) of the Secured Overnight Financing Rate (SOFR) as the Libor replacement for US markets.
“Our work on this has been the starting point for the firm’s very prominent position as regards Libor replacement,” says the London-based Sitlani. “As a result, we have a number of roles for a range of different clients.”
Linklaters was also well positioned to work with clients on new margin requirements for OTC derivatives — one of the central pillars in the framework for regulation of the products as agreed by the G20 in the wake of the financial crisis.
“The margin requirements for uncleared derivatives may be the most complicated piece of derivatives regulation implemented thus far, requiring a deep understanding of both the regulation itself and the ISDA documentation architecture,” says Douglas Donahue, derivatives partner at Linklaters in New York.
“It has provided us with an engaging opportunity to employ our expertise to develop practical and commercial solutions to very complicated issues.”
The heavy lifting around this regulatory work has kept Linklaters busy, acknowledges Sitlani. “Even clients that had not used us very much before, came to us to help them with their margin requirement work, which has helped us develop deeper relationships with them as a result. It’s been a real draw for us.”
Linklaters significantly boosted its global derivatives group in October last year when Donohue joined the firm from Mayer Brown, bringing three other lawyers with him. This gives Linklaters a global presence in the market, with a team of 12 focused on pure OTC derivatives work and a further 40 working in the wider derivatives and structured finance sector.
“Before Doug and team joined, we had market leading OTC derivatives teams in a number of our offices, notably the UK, Hong Kong, Japan and Germany but we had a smaller presence in the US,” acknowledges Sitlani.
Donahue and team have hit the ground running. “We were very excited to join such a fantastic existing team. Our transition has been seamless, and we are already operating as a cohesive global group.”
Linklaters’ work on margin requirements and its newly expanded team has given the firm an edge. “The new margin regulations are being rolled out around the globe but with local implementation and negotiation in some cases,” says Donahue. “Clients need a law firm with teams on the ground in the relevant jurisdictions, which has highlighted the strength of our global derivatives offering.”
Other areas where Linklaters has been active include deal contingent derivatives for corporate M&A and corporate equity volatility deals. “We are doing a lot of work in Hong Kong and London on those types of deals,” says Sitlani.
In Asia, Linklaters has also advised on the innovative and high-profile Stock Connect and Bond Connect projects designed to enable greater access between mainland China and Hong Kong markets. While the focus is on stocks and bonds, there is a derivatives component to these projects. And where there is derivative work to be done, there is Linklaters.
