Article: Derivatives Transactions A Basic Explanation of the Products Involved and a Summary of Pertinent Legal Compliance Considerations
3/1/2008 Timothy R. Damschroder
The world derivatives market is growing at a phenomenal rate, from virtually nothing in the mid 1970’s to a $7 trillion1 world wide market today.2 IFR Swaps, a swaps market publication, reported that interest rate swaps (a type of derivatives transaction) increased 25% during 19923 and 29% during the first half of 1993.4 The revenues earned by derivatives dealers have also expanded. The Wall Street Journal reported that Merrill Lynch’s derivatives-related revenue exceeded its stock-related revenue for 1993.5 Additionally, corporations and individuals are becoming increasingly involved in derivatives for hedging purposes as well as for speculative profit. As a result, it is becoming important for attorneys to have a basic understanding of derivative products, the relevant legal compliance issues, and the current derivatives regulatory environment. The purpose of this article is to provide attorneys with such an understanding.
