Derivatives and Bankruptcy: Where do the Safe Harbors Begin and End?

By Barbra R. Parlin, Partner & Francois Janson, Senior Counsel, Holland & Knight LLP

Swaps. Repos. CDOs. CMOs. Commodity futures. Options. Currency hedges. Credit enhancements. Freight forward contracts. Once the sole province of Wall Street investment banks and brokers, these and many other types of derivative instruments have become a common part of the every day business strategy of many enterprises such as airlines, utilities, manufacturers and retailers. In fact, trading in derivatives has become a key method by which enterprises that are reliant on commodities such as heating oil, jet fuel, corn, or bauxite that are subject to wide market price swings, or which trade globally and thus are subject to fluctuations in currency exchange, moderate or hedge their risk.

In the United States, derivatives can be

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