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Dodd-Frank:
 Let the Games Begin



November 15, 2012
Eileen Bannon                                                        Helen Kane
Introduction


               Financial Services Partner at Holland &                           President and founder of Hedge
               Knight in New York . Ms. Bannon                                   Trackers, LLC. Ms. Kane leads the firm
               represents capital market participants in                         by monitoring FASB/IASB
               a wide variety of transactions, including                         pronouncements, reaching out to
               interest rate, credit spread, credit default                      accounting firm derivative hedge
               swaps, total return and market value                              accounting specialists, overseeing
               swaps, repurchase agreements,                                     auditor and SEC responses, and
               securities lending agreements and                                 consulting with clients contemplating
               insurance-linked products. She advises                            complex derivative hedge accounting
               clients on the implications of Title VII of                       applications. Hedge Trackers makes
               Dodd-Frank on derivative business. She                            hedging and the related derivative
               also provides counsel on matters                                  accounting accessible to U.S.
               dealing with the treatment of derivative                          corporations with foreign currency,
               and other safe harbor contracts in                                interest rate, and commodity risk.
               insolvency.

                               © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not
                               represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
Agenda
         End-User Exception

         DF Protocol




              © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not
              represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
End-User Exception




 © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not
 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
End-User Exception
• Could we quickly review what it takes to qualify
  a transaction as an end-user agreement and
  what does it get me?

• What are the 2 types of swaps that currently are
  proposed to be cleared?

• What is the timing once a swap clearance
  determination becomes final?



            © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 5
            represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
End-User Exception
• Clearing requirements do not apply if one party
  to the swap:
  • Is not a financial entity
  • Is using swaps to hedge or mitigate commercial risk
  • Notifies the CFTC how it meets its financial
    obligations related to the swaps
     • Written credit support agreements, 3rd party
       guarantee, pledged assets, general funds, etc.
     • If a 34 Act reporting company, an appropriate
       committee of the Board of Directors has
       reviewed/approved decision to enter swaps
       without protections of clearing (can be annual)
               © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 6
               represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
End-User Declines
• And if I opt-out of, or do not qualify for, the
  end-user exception what does clearing entail?

• What do I need in order to have a clearing
  relationship?




             © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 7
             represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
End-User Declines
• If clearing requirements do apply
  • Need a relationship with a clearing member

  • Select a clearing house

  • Daily monitoring of position and posting
    collateral




            © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 8
            represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
Post Dodd-Frank
                                           Clearing
                                            House




                                                                                Clearing
       Clearing                                                                 Member
       Member                                                                  (affiliate of
                                 Initial Margin+                                 Dealer)
                                      MTM+
                                 Excess Margin

    Counterparty                                                                        Dealer


                                                  +

                                               OTC
   Counterparty                                                                       Dealer
                                 Two-way MTM


                   © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 9
                   represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
The Status of FX Swaps under DF?

• The Treasury has not yet determined if FX
  Swaps and FX Forwards will be treated as
  swaps for general regulatory purposes under
  Dodd-Frank.
• In April 2011 issued a proposal to exempt
  FX Swaps and FX Forwards
• Other foreign exchange products: foreign
  exchange options, currency swaps, and non-
  deliverable forwards are subject to Dodd-
  Frank.
           © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not10
           represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
August DF Protocol




 © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 11
 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
January 1, 2013

    • What are a company’s choices in
      amending existing ISDA agreements?




          © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 12
          represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
January 1, 2013

    • Swap dealers requirements

    • ISDA established the DF Protocol

    • All data must be entered, analyzed and
      matched by 12/31/12




            © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 13
            represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
Protocol

    • Explain what a protocol is

    • More specifically explain the “DF Protocol”




            © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 14
            represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
Protocol

    • ISDA has prepared a mechanism to effect
      supplements to existing swap documents.
      • “Protocol” is a multilateral contractual amendment
        mechanism

      • Eliminate costly and time-consuming negotiations




            © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 15
            represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
DF Protocol

   • “DF Protocol”
      • Amendment to ISDA and other non-ISDA swap
        agreements
      • Swap dealers and their counterparties agree to
        ISDA specified contractual supplements
      • No variation in terms of DF Protocol




            © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 16
            represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
DF Protocol
• Specifically what is the process I need to follow
  to adhere to the DF Protocol?



• What entities or parties execute the DF Protocol?




              © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 17
              represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
DF Protoc0l
 • The DF Protocol consists of three documents:
   • Protocol Agreement (including the Adherence Letter)

   • Protocol Questionnaire (including the Addendum to
     the Questionnaire)

   • DF Supplements to the Questionnaire




             © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 18
             represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
DF Protocol
• Counterparties adhere to the Protocol by
  entering into a single Adherence Letter online
  with ISDA (and paying a single $500 fee for all
  trades)
• ISDA will publish the Adherence Letter, which
  includes the manner the swap counterparty
  wishes to receive Questionnaires




              © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 19
              represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
DF Protocol
• Counterparties may elect Markit which is an
  online method of completing the rest of the DF
  Protocol and communicating with
  counterparties
• Counterparties will be required to deliver DF
  Questionnaires to each Swap Dealer in the
  method elected by the swap dealer (likely
  Markit)
  • Use of Markit is free to counterparties



              © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not20
              represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
DF Protocol
• Contents of the DF Protocol?




             © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 21
             represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
DF Protocol
  1. Requires detailed representations
  2. Obligates end-users to ongoing informational
     requirements
  3. Provides one-time notifications of
     substantive rights of end-users
  4. Constitutes agreement to disclosure of
     material confidential information
  5. Provides for the election of certain safe
     harbors which swap dealers may require as a
     condition of future trades
           © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not22
           represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
Representations
• What representations do I have to make in the
  Protocol?




             © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not23
             represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
Representations
• Know your Counterparty data
  • End-user’s name, address, principal occupation
  • Any guarantor of the end-user’s performance
  • Any “persons” exercising control over end-user’s
    positions




             © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not24
             represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
Questionnaire
  • Supply LEI or CICI (www.ciciutility.org)
  • Eligible Contract Participant Verification.
     • Large ECP (total assets exceeding $10m)
     • Hedging ECP (net worth of $1M and enters into
       swaps in connection with entity’s business)
     • Large entity ECP and Hedging ECP not effective
       for commodity pools after 12/31/12.




             © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not25
             represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
Representations
• Status as a “Special Entity” or not.
• Status as a “Financial Entity” or not. May elect
  not to answer.




             © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not26
             represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
Agreements and Notifications
• What are some of the notifications of rights that
  counterparties must provide end-users under
  Dodd Frank ?




              © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not27
              represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
Substantive Rights Notification
• Information on the risks and characteristics of
  the swap
   • Request and receive scenario analysis
• Right to a daily mid-market mark
• Prior to trade, the right to receive the price of
  the swap and basic material economic terms of
  the swap
   • Agree to receive oral disclosure of such
     information


              © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not28
              represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
Material Confidential Information
• What are some of the provisions of the DF
  Protocol relating to material confidential
  information?




             © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not29
             represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
Material Confidential Information
• Recording of personnel
• Disclosures required by the DF Rules
• Bring-down of existing non-disclosure
  agreement or incorporation of new non-
  disclosure agreement




             © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not30
             represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
Addendum to the Questionnaire
• What is the addendum to the Questionnaire?




             © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 31
             represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
Addendum to the Questionnaire
• The Addendum is a continuation of the
  Questionnaire
• If counterparties have completed the
  Questionnaire before the publication of the
  Addendum on November 9, 2012, they should
  update their Questionnaires.




             © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not32
             represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
Addendum to the Questionnaire
• Counterparties are asked to represent whether or
  not they are active funds. This is because swap
  dealers have to come into compliance with some
  further swap trading relationship documentation
  with active funds by 1/1/13. Such documentation
  will be the subject of a second protocol being
  called the ISDA November DF Protocol.




             © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not33
             represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
Addendum to the Questionnaire
• The remainder of the Addendum only concerns
  entities that are commodity pools.
• If a counterparty has represented in the
  Questionnaire that it is not a commodity pool, it
  can ignore the rest of the Questionnaire.
• If a counterparty is a commodity pool, and it
  does not qualify as an ECP other than as a Large
  ECP or Hedging ECP, it will be required by
  12/31/12 to make further ECP representations
  pursuant to the Addendum.

              © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not34
              represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
Addendum to the Questionnaire
• In addition, if a commodity pool has any direct
  participants that are not ECPs (or in certain
  cases indirect participants that are not ECPs) it
  will be required to make further ECP
  representations in connection with retail Forex
  transactions.




              © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not35
              represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
Schedules
Six schedules
  1. Definitions
  2. Mandatory for each swap dealer & counterparty
        Agreements and notifications previously discussed
  3. Safe harbor indicating that you assume
     responsibility for swaps and trading strategies
     recommended , if any
           4-6 relate to “Special Entities”




                © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not36
                represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
Schedules
• What does election of Schedule 3 entail?




             © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not37
             represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
Schedule 3 –
• Safe Harbor Counterparty Requirements
   • Designated Evaluation Agent or internal personnel
     responsible for evaluating swap recommendations


• In either case, counterparty must have in place written
  policies and procedures designed to ensure that the
  Designated Evaluation Agent or internal personnel are
  capable of evaluating swap recommendations

• Designated Evaluation Agent or counterparty must
  represent that it is exercising independent judgment


               © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not38
               represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
To Do
• Will I have to agree to Schedule 3 to continue to
  trade?




              © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not39
              represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
Where to Find Help
 Hedge Trackers and Holland & Knight are
  partnering to offer efficient compliance
   • Obtain LEI/CICI (s)
   • Complete and Submit Adherence Letter(s)
   • Familiarize your company with elections and evaluate
     implications (End-User & Safe Harbor Elections)
   • DF Terms Agreement determination
   • Review Existing Derivatives Policy and Counterparty
     Documents
        • Addressing Clearing vs. OTC Trading
   •   Prepare for Board approval of policy or policy amendment
   •   Registration on ISDA Amend
   •   Create Board Training
   •   Submit Questionnaire
                  © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not40
                  represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
Questions




       www.hedgetrackers.com
            408.350.8580
Silicon Valley | Chicago | Los Angeles
Contact Info

Eileen Bannon             Helen Kane
Holland Knight, Partner   Hedge Trackers, President
New York                  California
T: 212.513.3406           T: 408.350.8580
eileen.bannon@hklaw.com   hkane@hedgetrackers.com
www.hklaw.com             www.hedgetrackers.com

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Preparing Your Derivatives for Dodd-Frank

  • 1. Dodd-Frank: Let the Games Begin November 15, 2012
  • 2. Eileen Bannon Helen Kane Introduction Financial Services Partner at Holland & President and founder of Hedge Knight in New York . Ms. Bannon Trackers, LLC. Ms. Kane leads the firm represents capital market participants in by monitoring FASB/IASB a wide variety of transactions, including pronouncements, reaching out to interest rate, credit spread, credit default accounting firm derivative hedge swaps, total return and market value accounting specialists, overseeing swaps, repurchase agreements, auditor and SEC responses, and securities lending agreements and consulting with clients contemplating insurance-linked products. She advises complex derivative hedge accounting clients on the implications of Title VII of applications. Hedge Trackers makes Dodd-Frank on derivative business. She hedging and the related derivative also provides counsel on matters accounting accessible to U.S. dealing with the treatment of derivative corporations with foreign currency, and other safe harbor contracts in interest rate, and commodity risk. insolvency. © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 3. Agenda End-User Exception DF Protocol © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 4. End-User Exception © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 5. End-User Exception • Could we quickly review what it takes to qualify a transaction as an end-user agreement and what does it get me? • What are the 2 types of swaps that currently are proposed to be cleared? • What is the timing once a swap clearance determination becomes final? © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 5 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 6. End-User Exception • Clearing requirements do not apply if one party to the swap: • Is not a financial entity • Is using swaps to hedge or mitigate commercial risk • Notifies the CFTC how it meets its financial obligations related to the swaps • Written credit support agreements, 3rd party guarantee, pledged assets, general funds, etc. • If a 34 Act reporting company, an appropriate committee of the Board of Directors has reviewed/approved decision to enter swaps without protections of clearing (can be annual) © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 6 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 7. End-User Declines • And if I opt-out of, or do not qualify for, the end-user exception what does clearing entail? • What do I need in order to have a clearing relationship? © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 7 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 8. End-User Declines • If clearing requirements do apply • Need a relationship with a clearing member • Select a clearing house • Daily monitoring of position and posting collateral © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 8 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 9. Post Dodd-Frank Clearing House Clearing Clearing Member Member (affiliate of Initial Margin+ Dealer) MTM+ Excess Margin Counterparty Dealer + OTC Counterparty Dealer Two-way MTM © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 9 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 10. The Status of FX Swaps under DF? • The Treasury has not yet determined if FX Swaps and FX Forwards will be treated as swaps for general regulatory purposes under Dodd-Frank. • In April 2011 issued a proposal to exempt FX Swaps and FX Forwards • Other foreign exchange products: foreign exchange options, currency swaps, and non- deliverable forwards are subject to Dodd- Frank. © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not10 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 11. August DF Protocol © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 11 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 12. January 1, 2013 • What are a company’s choices in amending existing ISDA agreements? © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 12 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 13. January 1, 2013 • Swap dealers requirements • ISDA established the DF Protocol • All data must be entered, analyzed and matched by 12/31/12 © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 13 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 14. Protocol • Explain what a protocol is • More specifically explain the “DF Protocol” © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 14 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 15. Protocol • ISDA has prepared a mechanism to effect supplements to existing swap documents. • “Protocol” is a multilateral contractual amendment mechanism • Eliminate costly and time-consuming negotiations © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 15 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 16. DF Protocol • “DF Protocol” • Amendment to ISDA and other non-ISDA swap agreements • Swap dealers and their counterparties agree to ISDA specified contractual supplements • No variation in terms of DF Protocol © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 16 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 17. DF Protocol • Specifically what is the process I need to follow to adhere to the DF Protocol? • What entities or parties execute the DF Protocol? © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 17 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 18. DF Protoc0l • The DF Protocol consists of three documents: • Protocol Agreement (including the Adherence Letter) • Protocol Questionnaire (including the Addendum to the Questionnaire) • DF Supplements to the Questionnaire © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 18 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 19. DF Protocol • Counterparties adhere to the Protocol by entering into a single Adherence Letter online with ISDA (and paying a single $500 fee for all trades) • ISDA will publish the Adherence Letter, which includes the manner the swap counterparty wishes to receive Questionnaires © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 19 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 20. DF Protocol • Counterparties may elect Markit which is an online method of completing the rest of the DF Protocol and communicating with counterparties • Counterparties will be required to deliver DF Questionnaires to each Swap Dealer in the method elected by the swap dealer (likely Markit) • Use of Markit is free to counterparties © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not20 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 21. DF Protocol • Contents of the DF Protocol? © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 21 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 22. DF Protocol 1. Requires detailed representations 2. Obligates end-users to ongoing informational requirements 3. Provides one-time notifications of substantive rights of end-users 4. Constitutes agreement to disclosure of material confidential information 5. Provides for the election of certain safe harbors which swap dealers may require as a condition of future trades © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not22 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 23. Representations • What representations do I have to make in the Protocol? © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not23 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 24. Representations • Know your Counterparty data • End-user’s name, address, principal occupation • Any guarantor of the end-user’s performance • Any “persons” exercising control over end-user’s positions © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not24 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 25. Questionnaire • Supply LEI or CICI (www.ciciutility.org) • Eligible Contract Participant Verification. • Large ECP (total assets exceeding $10m) • Hedging ECP (net worth of $1M and enters into swaps in connection with entity’s business) • Large entity ECP and Hedging ECP not effective for commodity pools after 12/31/12. © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not25 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 26. Representations • Status as a “Special Entity” or not. • Status as a “Financial Entity” or not. May elect not to answer. © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not26 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 27. Agreements and Notifications • What are some of the notifications of rights that counterparties must provide end-users under Dodd Frank ? © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not27 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 28. Substantive Rights Notification • Information on the risks and characteristics of the swap • Request and receive scenario analysis • Right to a daily mid-market mark • Prior to trade, the right to receive the price of the swap and basic material economic terms of the swap • Agree to receive oral disclosure of such information © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not28 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 29. Material Confidential Information • What are some of the provisions of the DF Protocol relating to material confidential information? © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not29 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 30. Material Confidential Information • Recording of personnel • Disclosures required by the DF Rules • Bring-down of existing non-disclosure agreement or incorporation of new non- disclosure agreement © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not30 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 31. Addendum to the Questionnaire • What is the addendum to the Questionnaire? © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not 31 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 32. Addendum to the Questionnaire • The Addendum is a continuation of the Questionnaire • If counterparties have completed the Questionnaire before the publication of the Addendum on November 9, 2012, they should update their Questionnaires. © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not32 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 33. Addendum to the Questionnaire • Counterparties are asked to represent whether or not they are active funds. This is because swap dealers have to come into compliance with some further swap trading relationship documentation with active funds by 1/1/13. Such documentation will be the subject of a second protocol being called the ISDA November DF Protocol. © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not33 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 34. Addendum to the Questionnaire • The remainder of the Addendum only concerns entities that are commodity pools. • If a counterparty has represented in the Questionnaire that it is not a commodity pool, it can ignore the rest of the Questionnaire. • If a counterparty is a commodity pool, and it does not qualify as an ECP other than as a Large ECP or Hedging ECP, it will be required by 12/31/12 to make further ECP representations pursuant to the Addendum. © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not34 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 35. Addendum to the Questionnaire • In addition, if a commodity pool has any direct participants that are not ECPs (or in certain cases indirect participants that are not ECPs) it will be required to make further ECP representations in connection with retail Forex transactions. © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not35 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 36. Schedules Six schedules 1. Definitions 2. Mandatory for each swap dealer & counterparty Agreements and notifications previously discussed 3. Safe harbor indicating that you assume responsibility for swaps and trading strategies recommended , if any 4-6 relate to “Special Entities” © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not36 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 37. Schedules • What does election of Schedule 3 entail? © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not37 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 38. Schedule 3 – • Safe Harbor Counterparty Requirements • Designated Evaluation Agent or internal personnel responsible for evaluating swap recommendations • In either case, counterparty must have in place written policies and procedures designed to ensure that the Designated Evaluation Agent or internal personnel are capable of evaluating swap recommendations • Designated Evaluation Agent or counterparty must represent that it is exercising independent judgment © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not38 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 39. To Do • Will I have to agree to Schedule 3 to continue to trade? © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not39 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 40. Where to Find Help Hedge Trackers and Holland & Knight are partnering to offer efficient compliance • Obtain LEI/CICI (s) • Complete and Submit Adherence Letter(s) • Familiarize your company with elections and evaluate implications (End-User & Safe Harbor Elections) • DF Terms Agreement determination • Review Existing Derivatives Policy and Counterparty Documents • Addressing Clearing vs. OTC Trading • Prepare for Board approval of policy or policy amendment • Registration on ISDA Amend • Create Board Training • Submit Questionnaire © 2012 Hedge Trackers, LLC and Holland & Knight. This publication contains general information and does not40 represent the rendering of accounting or legal advice and is not a substitute for such professional advice or services.
  • 41. Questions www.hedgetrackers.com 408.350.8580 Silicon Valley | Chicago | Los Angeles
  • 42. Contact Info Eileen Bannon Helen Kane Holland Knight, Partner Hedge Trackers, President New York California T: 212.513.3406 T: 408.350.8580 eileen.bannon@hklaw.com hkane@hedgetrackers.com www.hklaw.com www.hedgetrackers.com