Learning Curve

On June 11, the U.S. District Court for the Southern District of New York issued an opinion with potentially far-reaching ramifications regarding the use of equity swaps by activist shareholders to build ownership positions in their portfolio companies.

The Markit ABX index, or the Markit ABX.HE index, has moved from being an arcane index tracking a set of U.S. home equity market derivatives to a widely watched barometer of the asset-backed securities markets.

On April 30, the Securities and Exchange Commission filed a civil action alleging securities fraud in connection with interest rate swaps entered into by Jefferson County, Alabama.

Over the next five years it is expected the market for Sharia-compliant offerings will grow by about 15-20% a year.

After an extremely rocky start perpetuated by investors' long-term deflationary expectations, and the continual threat of increased supply, the Japanese inflation market is showing tentative signs that it is finding its feet.

In Europe, the E.U. Emissions Trading Scheme set up under Directive 2003/87/EC facilitates the trading of greenhouse gas emissions allowances and credits by emitters and third parties, whether for compliance purposes or for financial gain, and now accounts for more than 60% of the global carbon market.

Since the emergence of the credit crisis in August, the equity markets have been particularly turbulent.

In conventional indices, companies are weighted relative to their market capitalizations, the largest having the highest weighting.

Despite their importance for financial sector development as established tools for managing risks, derivatives are few and far between in countries where the compatibility of capital market transactions with Islamic law requires the development of shari'ah-compliant structures.

High-grade asset-backed collateralized debt obligations are starting to hit their first events-of-default for missing interest payments, triggering a spate of credit-default swap payments from monolines.

Lawyers may consider that entering into ISDA Master Agreements--particularly for short-dated contracts--is a waste of time when a Long-Form Confirmation may provide equal protection.

Traditional futures users are mostly farmers or commodity producers who hedge the sale of their crops by using futures contracts to lock in certain selling prices.