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Pre-hedging versus front-running: six of one, and half a dozen of the other?
Institutions which provide market liquidity, such as banks, are in possession of very valuable confidential client data – their trading intentions. Trading intentions can generate revenue for the bank with little or no risk. This requires the bank to trade for its own account using the client’s confidential information before it trades for the client. This behaviour is generally given two labels: “front-running”, which is considered to be illegitimate, and “trading-ahead”, which is thought to be legitimate. However, their effects are often identical which should imply that their legitimacy should also be the same.
20 March 2024Supervisory tone sharpens further following ECB’s conclusions on its Desk Mapping Review
In this article, Dr Michael Huertas considers the impact on non-EU headquartered banking entities of the findings of the ECB-SSM’s Desk Mapping Review (Review). The Review assesses the governance and risk management capabilities of the EU operations of such non-EU headquartered entities.
20 March 2024Musk v Twitter: it’s not just lawyers who have an opinion on the likelihood of success of the litigation: the market does too!
Despite entering into a binding agreement with Twitter, Elon Musk has backed out of completing the purchase of the company at $54.20 per share. Twitter has commenced action in the court of Delaware. If it wins, its share price should increase to around $54.20 from the current $37.74. On the other hand, if it loses the share price will drop to $37.40, the level it was prior to the announcement of the bid. From this it is possible to calculate the probability of success of Twitter’s action implied by the current market share price (using some assumptions). This market implied probability can be compared to that obtained using legal analysis, which can then inform investors whether to buy or sell Twitter shares. It also gives litigators a rare opportunity to back their analysis!
20 March 2024Orthodoxy prevails? How receiving banks avoid liability for their customers’ frauds
Two recent cases have considered the issue of when a bank can be held liable by a victim of fraud on the basis that the fraudster directed the victim to make payment to an account held with the defendant bank. In both these recent cases, the receiving bank has been comprehensively excused of any liability. However, whether the receiving bank can ever be held liable in such circumstances remains an open question.
20 March 2024Take-off for digital bonds? The EU DLT pilot regime
The EU Regulation on a pilot regime for market infrastructures based on distributed ledger technology entered into force in June 2022. This article examines its key features and likely impact on the market for digital bonds.
20 March 2024Loan defaults: untimely remedies and potential hangovers in credit agreements
This article examines some of the current issues arising in leverage finance agreements on defaults and the expansion of express remedy terms that can impact on debt transfers.
20 March 2024Extending the cloak: individual immunity for foreign officials
In this article, Daniel Benedyk considers the application of state immunity to individuals acting on behalf of states and “separate entities”. This issue was not addressed in the State Immunity Act 1978 (SIA), but has since been developed in case law. In particular, it has been considered in two significant decisions of the Commercial Court in the last year.
20 March 2024The classification of interest rate swaps as contingent liability cases
In this article, Katherine Ratcliffe summarises Mr Justice Jacobs’ decision in CJ and LK Perks v NatWest Markets [2022] EWHC 726 (Comm) as to when the limitation period for an interest rate swap began and explains why Mr Justice Jacobs’ conclusions are correct.
20 March 2024Licence to Quill: legal services licences following the recent wave of Russian sanctions
In the wake of Russia’s unlawful invasion of Ukraine, public perception, triggered – and at times encouraged – by the media and MPs, appears to support a blanket ban on representing persons and entities designated (DPs) under the UK’s new sanctions framework, or even non-designated persons allied to Vladimir Putin or his regime. As a result, lawyers have quickly become stuck between, on the one hand, a purported moral obligation and internal-firm practice based on commercial considerations ostensibly consistent with foreign policy and, on the other, their duty to preserve due process. In this article, Alex Haines delineates between what is and is not permitted.
20 March 2024Russian sovereign debt default: a disputes perspective
Russia’s default on its foreign currency sovereign bonds is unprecedented and likely to lead to bondholder litigation as well as derivatives disputes. This article highlights the reasons for Russia’s default and explores the scope of potential bondholder litigation, together with some of the obstacles which bondholders may face in bringing claims against Russia. The article then considers the ripple effect on the derivatives market, where it is possible that investors in products linked to Russian debt may seek to recover losses by bringing mis-selling claims.
20 March 2024
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