OTC reforms to be softer
FIRMS that trade in over-the-counter (OTC) derivatives look set to win an important exemption under plans to overhaul the market, according to draft legislation that is working its way through the US Congress.
Lawmakers in the US had planned to introduce rules that would have seen all standardised OTC derivatives processed through clearing houses in a bid to minimise risks to the financial system.
But the draft bill includes a caveat that says OTC swaps would not need to be cleared if “one of the counterparties to the swap is not a swap dealer or major swaps participant”, in a coup for large manufacturing, commodities and transport groups that use the derivatives to hedge against currency movements, interest rates and commodity prices.