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Swaps D-Day to Trim Dealer Profits

Move to clearinghouses means dealers have to post collateral.

By Matthew Leising and Silla Brush, Bloomberg | Updated on March 11, 2013

The $639 trillion over-the-counter derivatives market begins the largest transformation in its 30-year history today with rules intended to contain another financial crisis, trimming profits for Wall Street banks.

Companies from JPMorgan Chase & Co. to BlackRock Inc. are now required under the 2010 Dodd-Frank Act to have most of their privately negotiated swaps trades backed by a clearinghouse that’s capitalized by the world’s largest banks. That means dealers and their customers have to post upfront collateral to absorb losses if a firm defaults and settle daily losses.

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