Derivatives law firm of the year: Linklaters

Asia Risk Awards 2021

Chong Liew, Linklaters

Linklaters wins this year’s award for top Asian derivatives law firm, thanks to the support it has given, and continues to give, the structural development of Greater China’s capital markets – something that is always watched closely by financial services professionals across Asia and further afield.

While there are many other law firms that could also claim to be supporting the development of China’s financial services – and, indeed, there was a healthy amount of competition for this category – Linklaters’ regular engagements with regulators and market participants to craft and promote robust securities and futures legislation has won praise from many quarters.

“The regulatory front has been busy because of global reforms regarding new structures and products. Libor has been a key topic, and we are helping a lot of banks in Asia transition as Libor is soon to disappear. We are also engaged with the International Swaps and Derivatives Association and its Chinese counterpart (Nafmii) to draft transition language in Chinese. It is arduous but important work that will benefit Asia and the world,” says Chong Liew, a Linklaters capital markets partner and head of its structured finance derivatives team in Hong Kong.

He adds that what distinguishes the firm is the way in which it has aided the structural development of mainland Chinese markets through its interactions with the country’s regulators: “We do what a lot of firms in this space do not do, as many of our colleagues have been here [in Asia] for 30 years or more, so we like to get our hands dirty. For example, we helped both Hong Kong and Shanghai set up their over-the-counter derivatives clearing houses and continued to help them to refine their offerings in the past 12 months.”

Given the gargantuan growth potential of the mainland’s futures exchanges – to say nothing of their current size – by being their main counsel at such an early stage means Linklaters is likely situated for more prosperous years.

But the firm says its focus is not just on receiving an immediate fee for the work it is currently doing, it also wants to contribute to the long-term development of Asia’s markets.

We pay a great deal of attention to structural development and aiding the development of markets. Many firms do not want to get started in that space because it is a long-term commitment, but here we are

Chong Liew, Linklaters

“By helping them [Chinese exchanges] get their licences in Hong Kong and Singapore, that has served to make them more international. We pay a great deal of attention to structural development and aiding the development of markets. Many firms do not want to get started in that space because it is a long-term commitment, but here we are ­… [and] have been here a long time and are ready for the long haul,” says Liew.

Over the past 12 months, Linklaters has continued to advise each of the Chinese futures exchanges in the internationalisation programmes. This includes compliance with Hong Kong and Singapore approval requirements, how to market their services to overseas jurisdictions and collaborations with overseas exchanges and settlement systems.

Other ways in which Linklaters has helped the development of Asian markets recently is its role in initiatives such as: introducing a more varied array of covered bonds in Japan; introducing China’s first-ever covered bond; work on a covered bond in Malaysia; and advising BNY Mellon on a new initiative to make Bond Connect and Stock Connect more liquid.

Sanctions

One area of advisory work that is particularly growing in importance for Linklaters at the moment is that of sanctions, which has taken centre stage over the past couple of years in Europe and the US tussle with China over trade.

“We have been advising on this [sanctions] in a big way … it provides a lot of work for us. US firms know a lot about the… sanctions landscape. But it is all very new for Chinese investment firms and banks, so we are helping them understand the changing landscape,” says Liew.

Yet it is very sensitive work, and as a foreign law firm operating on the mainland it also means Linklaters, too, must do its due diligence to manage its own risks.

Given the vast scope that exists in helping both international firms and Chinese investment houses deal with shifting sanctions rules, Linklaters has been able to carve out a nice niche for itself, Liew says. This has led to the drafting of termination events in contracts; some agreements contain hedging provisions in anticipation of destructive occurrences, he says.

While the firm’s competitors also advise on sanctions matters, Linklaters’ strength is its ability to combine its sanctions work with its product work, such as derivatives and capital markets projects, says Liew.