General Course Information
1.1 Course details
| Course code: | LLAW6088 / JDOC6088 |
| Course name: | Derivatives: law and regulation |
| Programme offered under: | LLM Programme / JD Programme |
| Semester: | First |
| Designated research course: | No |
| Specialization: | Commercial, corporate and financial law |
| Prerequisites | No |
| Credit point value: | 9 credits / 6 credits |
1.2 Course description
This course is a pioneering financial derivatives course, taught by leading practitioners in the field. The course aims to give students a working knowledge of financial derivatives and structured products as used in the financial markets in Hong Kong and globally and of the key legal and regulatory concepts and documentation involved, which will be useful to them in their future professional life as commercial or finance lawyers. While looking at the evolving legal and regulatory issues arising from the derivatives market, the course will primarily focus on the private law (English and Hong Kong) aspects of cross-border derivative transactions.
The course will be liberally illustrated with real life case studies of the uses (and abuses) of derivatives, drawn primarily from the practice experience of the presenters, and will include practical exercises in the documentation of transactions using the ISDA documentation suite.
Topics to be covered include:
Infrastructure
– what are derivatives; introduction to key concepts; introduction to common structures (swaps, options and forwards); introduction to common derivative product terminology
– introduction to the derivatives market: key market players; regulators; important products; milestones; current issues
– main uses of derivatives e.g. hedging, investment, speculation, financing, market access
– lifecycle of a derivatives transaction
Key legal concepts
– capacity of counterparties to enter into derivative transactions
– analysis of the ISDA documentation suite for derivatives – close-out of derivative transactions, close-out netting, the distinction between netting and set-off
– collateral: distinction between taking collateral by way of title transfer and security interest; purposes of taking collateral; key Hong Kong legal issues in relation to security interests
– lessons learned from the insolvency of Lehman Brothers
Products and key features
– FX and interest rate derivatives (including the novel features of CNH)
– equity derivatives
– credit derivatives
– retail structured products (Minibonds, equity-linked notes, accumulators)
– stock repurchase arrangements (repos) and stock loans
– clearing of OTC derivatives including client clearing
Regulatory framework
– an overview of the licensing regime for derivatives in Hong Kong
– an overview of what marketing and product approval restrictions apply to the distribution of derivative products in Hong Kong
– suitability, misselling and product governance, including an examination of the minibonds crisis, 10 years on
– reform of the Hong Kong derivatives market in the wake of the financial crisis: mandatory clearing and reporting of OTC derivatives and mandatory margining
– ethical considerations in the use of derivatives
1.3 Course teachers
| Name | E-mail address | Office | Consultation | |
| Course convenor | Andrew Malcolm | andrew.malcolm@linklaters.com | N/A | By email |
| Course convenor | I-Ping Soong | TBA | N/A | By email |
Learning Outcomes
2.1 Course Learning Outcomes (CLOs) for this course
CLO 1 Demonstrate an understanding of the derivatives market and its key players and features.
CLO 2 Analyse the legal principles, regulatory regime and evolving legal and regulatory issues arising from the derivatives market with a focus on private law aspects of cross-border derivative transactions.
CLO 3 Apply the law and knowledge acquired from this course to critically analyse the legal and regulatory risks of the relevant products and documentation.
CLO 4 Describe, explain, differentiate and illustrate typical uses of the key derivative products.
CLO 5 Lead and participate actively in classes and casework.
2.2 LLM and JD Programme Learning Outcomes (PLOs)
Please refer to the following link:
LLM – https://course.law.hku.hk/llm-plo/
JD – https://course.law.hku.hk/jd-plo/
2.3 Programme Learning Outcomes to be achieved in this course
| PLO A | PLO B | PLO C | PLO D | PLO E | PLO F | |
| CLO 1 | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
| CLO 2 | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
| CLO 3 | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
| CLO 4 | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Assessment(s)
3.1 Assessment Summary
| Assessment task | Due date | Weighting | Feedback method* | Course learning outcomes |
| Class participation
(attendance, preparation and participation in class discussions) |
N/A | 10% | 1 | 1-4 |
| Written assignment | 1 Nov 2024 | 30% | 1 | 1-4 |
| Take home exam | 17 Dec 2024 | 60% | 1 | 1-4 |
| *Feedback method (to be determined by course teacher) | |
| 1 | A general course report to be disseminated through Moodle |
| 2 | Individual feedback to be disseminated by email / through Moodle |
| 3 | Individual review meeting upon appointment |
| 4 | Group review meeting |
| 5 | In-class verbal feedback |
3.2 Assessment Detail
To be advised by course convenor(s).
3.3 Grading Criteria
Please refer to the following link: https://www.law.hku.hk/_files/law_programme_grade_descriptors.pdf
Learning Activities
4.1 Learning Activity Plan
| Seminar: | 3 hours / week for 12 teaching weeks |
| Private study time: | 9.5 hours / week for 12 teaching weeks |
Remarks: the normative student study load per credit unit is 25 ± 5 hours (ie. 150 ± 30 hours for a 6-credit course), which includes all learning activities and experiences within and outside of classroom, and any assessment task and examinations and associated preparations.
4.2 Details of Learning Activities
The course will be presented in weekly seminars. Practical exercises are included and student participation is encouraged.
Learning Resources
5.1 Resources
| Reading materials: | Reading materials are posted on Moodle |
| Core reading list: | Hong Kong Derivatives Law and Practice, Liew and Soong |
| Recommended reading list: | Posted to Moodle each week by topic |
| Use of AI tools | It is accepted that students may wish to make appropriate use of AI tools as study aids. Students should be aware, however, that in this field and in the course convenors’ personal experience, AI tools are particularly prone to hallucinate, sometimes egregiously. |
5.2 Links
Please refer to the following link: http://www.law.hku.hk/course/learning-resources/