Template:Dealer polls after LBIE v AGFP: Difference between revisions
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The quaint notion that a [[dealer poll]] would, at the point when needed, actually do anything was laid to rest in the 2023 case of {{casenote|Lehman Brothers International (Europe)|AG Financial Products, Inc.||}} which involved the closeout and valuation of a {{1992isda}} following of [[Lehman]]’ collapse. This case is an object less on for many unacknowledged facts about derivatives trading — such as that cases involving can take 15 years to get to judgment — | The quaint notion that a [[dealer poll]] would, at the point when needed, actually do anything was laid to rest in the 2023 case of {{casenote|Lehman Brothers International (Europe)|AG Financial Products, Inc.||}} which involved the closeout and valuation of a {{1992isda}} following of [[Lehman]]’ collapse. This case is an object less on for many unacknowledged facts about derivatives trading — such as that cases involving can take 15 years to get to judgment — but one of the standout point is the forlorn pointlessness of convening [[dealer poll]]s. | ||
From Crane J’s factual summary: | |||
{{quote|In accordance with its responsibilities under the {{isdama}}, following its declaration of an [[event of default]], Assured engaged the assistance of Henderson Global Investors, Ltd. (''Henderson''), to conduct an auction so that it could satisfy the ISDA {{isda92prov|Market Quotation}} process. Henderson contacted 11 potential bidders in advance of the auction that took place on September 16, 2009. ''Not one bid was received''.<ref>Emphasis in original.}} | |||
LBIE did manage to get some indicative bids that were, expert witnesses thought “indicative market data of where these transactions, these underlyings would be trading at that stage on termination date”. But not one of them was prepared to make a binding offer, and the most fullsome indicative bid was disclaimed up the wazoo: | |||
{{quote|“This is not investment advice of any kind and we do not purport any degree of accuracy in these levels.”}} | |||
Useless, you would think, as an input in determining a fair market level. Indeed, internal LBIE emails — kids, if you learn ''one sodding lesson'' from the history of financial market disaster let it be “don’t put your darkest thoughts in emails to your buddies” — suggested they only wanted indicative bids to encourage other banks (many may have had similar trades on their books as LBIE), to make ''any'' bid, so that LBIE could then argue there was a market price: | |||
{{quote|“any color is good color to us and [JP Morgan ermployee] is lobbying for [JP Morgan’s US trading team] to at least put a number on it even if it is zero”. }} | |||
Crane J notes, somewhat drily: “This raises the concern that LBIE’s goal, with respect to the indicative bids, was to make these trades seem as worthless as possible to then be able to collect the most from Assured in a lawsuit.” | |||
Revision as of 09:12, 21 April 2023
The quaint notion that a dealer poll would, at the point when needed, actually do anything was laid to rest in the 2023 case of Lehman Brothers International (Europe) v AG Financial Products, Inc. which involved the closeout and valuation of a 1992 ISDA following of Lehman’ collapse. This case is an object less on for many unacknowledged facts about derivatives trading — such as that cases involving can take 15 years to get to judgment — but one of the standout point is the forlorn pointlessness of convening dealer polls.
From Crane J’s factual summary:
In accordance with its responsibilities under the ISDA Master Agreement, following its declaration of an event of default, Assured engaged the assistance of Henderson Global Investors, Ltd. (Henderson), to conduct an auction so that it could satisfy the ISDA Market Quotation process. Henderson contacted 11 potential bidders in advance of the auction that took place on September 16, 2009. Not one bid was received.<ref>Emphasis in original.
LBIE did manage to get some indicative bids that were, expert witnesses thought “indicative market data of where these transactions, these underlyings would be trading at that stage on termination date”. But not one of them was prepared to make a binding offer, and the most fullsome indicative bid was disclaimed up the wazoo:
“This is not investment advice of any kind and we do not purport any degree of accuracy in these levels.”
Useless, you would think, as an input in determining a fair market level. Indeed, internal LBIE emails — kids, if you learn one sodding lesson from the history of financial market disaster let it be “don’t put your darkest thoughts in emails to your buddies” — suggested they only wanted indicative bids to encourage other banks (many may have had similar trades on their books as LBIE), to make any bid, so that LBIE could then argue there was a market price:
“any color is good color to us and [JP Morgan ermployee] is lobbying for [JP Morgan’s US trading team] to at least put a number on it even if it is zero”.
Crane J notes, somewhat drily: “This raises the concern that LBIE’s goal, with respect to the indicative bids, was to make these trades seem as worthless as possible to then be able to collect the most from Assured in a lawsuit.”