Derivatives in Review highlights important legal, regulatory and other newsworthy developments in the area of derivatives.
On September 10, Orrick will host a Financial Industry Breakfast Briefing in our New York office. The briefing will cover the current state of the derivatives market with specific updates on the implementation of Dodd-Frank and recent litigation involving derivatives. Speakers include partners Nikiforos Mathews, Steven Fink and Thomas Mitchell. This course has been approved in accordance with the requirements of the Continuing Legal Education Board for a maximum of 1.0 credit hour. For additional information about this event and to register, please click here.
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Featured in this month's edition:
"U.S. Person" Definitions Under the Final Exemptive Order and the Final Guidance, Application to Certain Foreign Branches, and Determination for Collective Investment Vehicles
The cross-border application of Title VII of the Dodd-Frank Act has been a vexing question for regulators. A major factor determining the ultimate reach of such swap regulation is the definition of "U.S. person." The final exemptive order and the final guidance approved by the CFTC in July set forth and clarify this important definition.
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Financial Transaction Tax Developments
The governments of Europe continue to consider the application of a financial transaction tax on bond, equity and derivatives transactions. On July 3, the European Parliament approved, subject to several proposed amendments, a February directive advanced by eleven participating EU member-states to implement such a tax.
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End-User Swap Reporting Obligations Under Dodd-Frank
End-users in the United States traditionally have entered into swaps with counterparties that registered with the CFTC as swap dealers. Where one party to a swap is a registered swap dealer, that party is required to report relevant swap data to a swap data repository. However, in certain circumstances, swap reporting requirements fall to end-users.
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Detroit Commences the Largest Chapter 9 Ever – What's Next
On July 18, Detroit became the largest city to file for rehabilitation under Chapter 9. Detroit is seeking to restructure approximately $18 billion in accrued liabilities, including unsecured debt and other liabilities of $11.5 billion, and secured obligations—including swap obligations—of $7.3 billion.
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IRS Issues Changes to the Mixed Straddle Regulations
On August 2, the IRS issued temporary regulations relating to accrued gain or loss associated with a position that becomes part of a section 1092(b)(2) identified mixed straddle. The temporary regulations segregate pre-identification gain and loss on a mixed straddle position from post-identification gain and loss, preventing taxpayers from using identified mixed straddles as an alternative to selling assets to accelerate gain or loss.
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