Revisiting issues involved in transferring positions (published in AIMA Journal Edition 125, March 2021)
This article will revisit issues involved in transferring trading positions. We will begin with a refresh on the legal differences between assignment and novation. We will then consider how different categories of trading positions (or ‘asset classes’) can be transferred. Finally, we will examine some issues to watch out for when reviewing transfer provisions in trading agreements.
Counterparties will frequently wish to transfer positions for a host of reasons, including acquisitions and restructurings, ceasing to provide a particular service, and tax and regulatory issues. Recently, in the context of Brexit, counterparties may have been novating contracts from a United Kingdom (UK) entity to a European Union affiliate.