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Derivatives Users Likely to See Higher Costs

Rising OTC costs may push companies to clear derivatives. (Krishnan Iyengar of Reval)

By John Hintze | Updated on October 19, 2012
Krishnan Iyengar of RevalNearly 60% of global financial institutions say higher capital requirements will make them wary about engaging in capital-intensive businesses, such as derivatives transactions, and 18% say they will pass the associated costs on to clients, according to a recent survey. In fact, the survey, conducted by SunGard and the Professional Risk Managers’ International Association (PRMIA), found a quarter of respondents have already exited such businesses.

While the survey collected input mostly from financial institutions, its results point to rising costs and fewer providers, which almost certainly means higher prices for corporate users of derivatives.

A separate survey, conducted by Reval, a provider of treasury and risk management software, found 34% of corporate respondents expect new regulations will either increase their costs or reduce the extent of their hedging activities.

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