International Finance Law
OVERVIEW
The international financial markets are the largest markets in the world. International finance has enjoyed massive growth and expansion in recent decades following an earlier period of post-War recovery and reconstruction. The largest companies in the world and governments use these markets on a daily basis to fund their capital and investment needs and working capital programmes. Over US$4tn is moved each day in the international currency markets with the total global financial system being worth in excess of US$180tn.
The international financial markets are made up of a number of separate markets. These principally consist of the Euro-syndicated loan and Eurobond markets with an underlying Euro-dollar deposit or interbank market. The international capital markets include global equity issues and depository receipts as well as international debentures and shorter Medium Term Note (MTN), Euronote and less than one year Commercial Paper programmes. The financial derivatives markets have expanded substantially since the early 1970s with nominal values in excess of $601tn at end 2010. These include the international over-the-counter (OTC) Swap and OTC or exchange traded Futures and Options markets as well as Credit Derivatives and other new product markets such as in the energy and environmental areas. A separate structured finance market had also exploded in size immediately before the financial crisis in 2008-2009, which included such instruments as Collateralised Debt Obligations (CDOs) and Credit Linked Notes (CLNs) as well as Credit Default Swaps (CDSs) in the credit derivatives area.
The operation of these markets raises a number of difficult issues especially in terms of structure and documentation, pricing and disclosure, payment, clearing and settlement. An enormous number of transactions are carried out on a daily basis between a significant number of market counterparties and end-users. All of these interests have to be managed and the stable operation of the markets protected for all users and beneficiaries. International financial markets are, in practice, principally managed on an internal market or self-regulatory basis which is necessary in light of their size and the absence of any global authority capable of overseeing them. While the main market participants are regulated at the domestic level, international contracts themselves are dealt with on a private law basis using standard documentation prepared by various trade bodies or associations which acts as a form of replacement or substitute for formal official regulation.
The main trade bodies include the Loan Market Association (LMA) in the loan area, the International Capital Markets Association (ICMA) in the bond area and the International Swaps and Derivatives Association (ISDA) in the derivatives areas. Each of these organisations has produced several series of standard form agreements and master documents which govern the rights and interests of the parties in these markets and to a significant extent the structure and operation of the markets themselves.
The purpose of this course is to examine the nature, structure and operation of each of the principal markets involved. This includes the international loan and bond market, project finance and securitisation markets and financial derivatives markets. The main standard documentation used is identified in each case. The duties and obligations of each of the parties involved are identified and rights and remedies explained. Stock markets and exchanges are also examined with other more recent forms of alternative investment markets, such as hedge funds, private equity and sovereign wealth funds being referred to. Relevant regulatory provisions are noted where relevant. National practices are outlined where appropriate. Recent developments in the markets are also referred to where this may be of interest.
Recommended Reading
William Clarke, How the City of London Works (Thompson London 7th ed. 2008);
Stephen Valdez and Philip Molyneaux, An Introduction to Global Financial Markets (Macmillan, London, 6th ed. 2010); Richard Roberts, Inside International Finance (Orion London 1999).
On the development of the City of London more generally see also, David Kynaston, The City of London (Chatto & Windus London) 4 Volumes.
