A&O nets derivatives

NETALYTICS: will reduce financial institutions' legal bills

City giant Allen & Overy has launched an innovative on-line service which allows financial institutions to cut down on their legal bills by assessing more quickly whether a transaction is eligible for netting.

Netting is the offset of payables against receivables to reduce credit exposure to a counterparty.

For example, netting swap payments in bankruptcy will reduce a client's credit exposure to the net obligation of a counterparty.

Traditionally, financial institutions have employed outside lawyers or in-house counsel to provide detailed legal opinions on whether or not a transaction is eligible for netting.

Netalytics was developed by Allen & Overy's derivative services affiliate as a joint venture with the global trade grouping, the International Swaps and Derivatives Association (ISDA).

It took more than 2,000 hours of lawyers' time to develop.

It is available to ISDA members on an annual subscription.

Four members that piloted the service have agreed to subscribe.

The on-line tool distills the decision about whether a transaction is eligible for netting down to 13 key questions, which have been standardised across 35 jurisdictions.

Users answer the detailed questions, and instant colour coded answers - green for a positive response, red for negative and yellow for a possibility - provide detailed cross-references to the appropriate section of the actual ISDA netting opinion, legislation and regulations, all of which are stored on the site.

It also allows users to conduct cross-jurisdictional netting analysis, so answers to one or more of the 13 questions can be compared.

Marc-Henri Chamay, head of e-business at Allen & Overy, said: 'Netalytics allows firms to save money and time by getting a quick answer to their netting enquiry.'

He also stressed that Netalytics reduced a company's legal and financial risks by standardising their netting approach globally.

The service is targeted at financial institutions, and the levels of annual subscription range from $20,000 to $40,000.

It will be regularly updated to reflect new netting opinions and ISDA-commissioned research.

LINKS: www.netalytics.com

Victoria MacCallum