From the May 2014 Special Report issue of Treasury & Risk magazine

Margin Requirement Still Hanging Over Derivatives Users

As Dodd-Frank regulations are implemented, companies cite greater administrative burden and higher costs for derivatives, as well as a fragmenting market.

Dodd-Frank derivatives regulations continue to challenge corporate treasurers. Companies that use over-the-counter (OTC) derivatives to hedge their risks cite higher costs and increased administrative burdens, according to recent surveys, and a significant portion see different regions’ regulations resulting in a fragmented market.

But the biggest concern for U.S. companies that hedge with derivatives is the possibility that regulators will require non-financial end users to post margin on their derivatives positions.

Derivatives Regs Affect Centralized Treasury

There’s also concern about how derivatives regulations will affect companies with central treasury units, which are business units within multinationals that provide financial services such as netting of risks and trading derivatives for other units of their company. Almost half (47%) of the companies surveyed by the Coalition for Derivatives End-Users said they have a central treasury unit.

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