Islamic derivatives

The pioneer in innovative Islamic financing solutions across the globe

Our Islamic derivatives experts are consistently called upon by the world's leading financial institutions and regulators to develop and advise on ground breaking Shari'a compliant risk management products.

Clifford Chance has been at the forefront in the development of these products, pioneering new structures and closing some of the first Islamic trades in the world as standalone transactions or in-conjunction with high profile Islamic financings.

We are at the cutting edge of drafting and structuring Islamic hedging transactions and are at the forefront of developing and pioneering innovative structures that use traditional Islamic products like the murabaha, wa'ad, salam and arbun to generate similar economic profiles to conventional derivatives but in a Shari'a compliant manner.

Some examples of transactions on which we have advised using the above structures include:

• Zain swaps - advising Zain Saudi in relation to its Shari'a compliant profit rate swaps with a syndicate of hedging banks on an aggregate notional amount of US$2.2 billion. The syndicate attracted a mix of international and regional banks who provided hedging on both US$ and SAR exposures.
• Deutsche Bank AG profit rate swaps - advising Deutsche Bank AG in connection with its Shari'a compliant profit rate swaps.
• Dubai Islamic Bank profit rate swaps - advising Dubai Islamic Bank in connection with its Shari'a compliant profit rate swaps.
• Islamic Bank of Asia - advising Islamic Bank of Asia in connection with its Shari'a compliant master agreement, profit rate swaps and fx forwards.
• Establishing  Islamic, derivative based structured product platforms for a variety of clients.
• Hedging products – working with leading financial institutions in the structuring of Shari'a compliant hedging products.

The success of such transactions has made Clifford Chance the law firm of choice for financial institutions looking to expand their Islamic portfolio and develop Shari'a compliant products to offer its customers. Clifford Chance has been instructed by a selection of well-renowned banks from Europe, the Middle East and Asia to develop risk management products such as profit rate swaps, cross currency swaps, fx forwards and Islamic repos, as well as prime brokerage services, each product specifically designed and structured to suit the needs of the financial institution and its customer base.

Clifford Chance is counsel to the International Swaps and Derivatives Association in relation to drafting the ISDA/IIFM Tahawwut Master Agreement launched in March 2010.  Modelled primarily on the ISDA Master Agreements, this standardised template document will be available to all market participants in all jurisdictions, for example with murabaha based Islamic derivative transactions.   Clifford Chance also advises regulators around the globe on the regulation of Islamic compliant derivative structures.

Islamic structured products

We successfully merged Islamic finance principles with "derivative based" capital market products by developing Islamic structured products whereby holders of sukuk certificates receive pay-offs linked to underlying stocks or indices, thereby mirroring the economic effect of derivative bond transactions. We have also advised our clients on other possible structures for Shari'a compliant derivative products.

Some of our recent experience includes:

• Shari'a Jurisdictional Surveys - conducting and coordinating single and multi-jurisdictional surveys on the applicability of Shari'a principles to derivatives, structured products and financing platforms.
• Islamic EquityBuilder Certificates™ - advising Deutsche Bank on structuring and documenting Islamic EquityBuilder Certificates™, an Islamic wealth management product structured to permit Islamic investors to invest in Shari'a compliant certificates listed on the Frankfurt stock exchange with pay-offs linked to the performance of an underlying stock, index or securities.
• Islamic Structured Platform - advising HSBC and Morgan Stanley in connection with the documentation of their respective Shari'a compliant certificates with payoffs linked to the performance of an underlying stock, index or securities.