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Smaller Companies Get Swaps Pass

Regulators exempt derivatives end-users from strict oversight.

By Jesse Hamilton and Steven Sloan, Bloomberg | Updated on April 19, 2012

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.

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