Smaller Companies Get Swaps Pass

Regulators exempt derivatives end-users from strict oversight.

Farm co-ops, small banks and the local gas company may be toasting U.S. regulators whose votes yesterday freed them from strict Dodd-Frank Act oversight of dealers in the $708 trillion global swaps market.

Those and other types of firms rely on trading and holding swaps -- financial instruments they use to hedge risk or speculate. Because of a 2010 proposal that any company entering into swaps worth more than $100 million in a year could be treated as a highly regulated dealer, so-called end users fought an effort to include them in a new system of capital and collateral requirements designed to avoid a repeat of the 2008 financial crisis.

Reaching Dominant Players

CFTC Chairman Gary Gensler said he was confident the rule would impose new requirements on the dominant players in the swaps market even though the threshold is higher than initially proposed.


“The companies that have more than $100 million and less than $8 billion have to be thrilled,” said Andrea Kramer, a partner at McDermott Will & Emery LLP in Chicago. “This is a win for companies that really never saw themselves as dealers in the first place.”

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