Derivatives
Bovill provides services to a number of clients which undertake investment business in relation to derivatives. These include brokers, proprietary traders, investment managers and operators of Multilateral Trading Facilities ("MTFs").
Firms offering traditional derivatives, such as forward contracts, foreign exchange options and contracts for difference, have been subject to FSA regulation for some time; whereas firms trading exotic derivatives, including commodity, carbon and freight derivatives, may have only recently found themselves subject to FSA requirements as a result of the widening of the scope of regulation introduced by MiFID. Operators of MTFs have since MiFID also been subject to much closer scrutiny by the FSA, and have seen material changes to the capital resources requirements applying to them. Bovill is well positioned to help all of these types of firm. We have in-depth experience of providing perimeter guidance, obtaining FSA authorisation, and providing ongoing support.
There are a number of difficult regulatory issues which are of particular relevance to this sector, and which we have helped firms to resolve, including:
- application of the best execution rules set out in the Conduct of Business Sourcebook;
- overcoming the difficulty in obtaining appropriate documentation from clients to meet client categorisation and anti money laundering requirements;
- ensuring that financial promotions and other communications meet the "fair, clear and not misleading" test;
- application of capital requirements, including the use of waivers; and
- seeking to establish a new market (via commencing the authorisation process to set up an MTF) in freight derivatives.
We have a particular focus on firms operating within the shipping sector. We assisted two freight derivative firms to prepare for the implementation of MiFID by helping to determine which activities were caught by regulation, updating client documentation and internal procedures, and providing training to traders and compliance staff. We have also undertaken a client categorisation project for a key player in this sector.
In addition, Bovill has a number of clients which trade carbon credits. More information about how we can assist firms operating in this sector can be found here.