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OTC Derivatives Lessons

The Coalition for Derivatives End-Users fights proposed regs by explaining how companies use the hedging tools.

By Richard Gamble | Updated on May 01, 2010

How does a bunch of nerds in corporate treasuries mobilize to keep their best risk management practices and change the minds of members of Congress? They’re doing it now to protect over-the-counter derivatives. It started when a few alert practitioners at companies like Cargill, Chesapeake Energy and 3M, as well as vigilant technology vendors and lobbyists, spotted a provision that would require central clearing of all derivative trades buried in cap-and-trade energy legislation that had passed the House in June 2009. They blew the whistle.

Most treasury staffs are indirectly connected to the power corridors of Washington through trade associations. The problem is most business lobbyists have a limited understanding of how and why corporate hedgers use OTC derivatives, and experts in OTC derivatives have a limited understanding of how to influence legislation. The challenge was to bring them together.

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