The world's largest banks are racing to meet a U.S. and Japanese deadline next month when billions of dollars in new collateral requirements will begin to hit the over-the-counter derivatives market, even as new regulatory fault lines emerge.

Firms are testing systems for exchanging collateral for the trades, signing new legal documents and pursuing regulatory approval for models that could help blunt the cost of compliance, according to lawyers, executives and consultants helping firms meet one of the biggest changes in decades to the swaps market. The rules are taking effect in the U.S. and Japan on Sept. 1, while the European Union, Singapore, Hong Kong and Australia have announced delays.

The hundreds of pages of restrictions are the result of years of deliberation by regulators around the world after the financial crisis when risk built up directly between traders. Global regulators estimate that the rules could eventually require more than 700 billion euros ($790 billion) in cash, government bonds and other forms of collateral to protect against the threat that the default of one trader spreads risk to others and potentially throughout the financial system.

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