Search
 
Research

Real-World Impact of Derivatives Reforms

Original research project finds that derivatives end users face higher costs and heavier workloads, but they aren't moving away from derivatives for hedging financial risks.

By Meg Waters | Updated on November 21, 2013

Much has been written about the possible implications of recent regulations on companies that use derivatives to hedge foreign exchange, interest rate, and other risks. Shortly after the Dodd-Frank Act passed in 2010, corporate treasurers began voicing concerns about how the law would affect their derivatives programs. Non-financial institutions are exempt from many of the key provisions, but that doesn’t mean they won’t feel an impact. Treasurers feared that Dodd-Frank, in conjunction with Basel III and other recent regulatory changes around the world, would increase both derivatives prices and the complexity of hedging financial risks.

For the past three years, hands have been wrung and keyboards have clicked to the beat of the war drum, sounding an alarm about the problems that the regulations might create the market. Nevertheless, little time has been spent investigating how regulations are actually affecting derivatives end users. That’s what Treasury & Risk set out to do this fall in a research project sponsored by PwC. We polled 196 Treasury & Risk readers to determine whether their fears about Dodd-Frank and other derivatives regulations have come to fruition.

We found that hedging is costing companies more and is consuming more staff time than in years past. As a result, some derivatives end users are looking into alternatives to over-the-counter (OTC) trading, while others are reducing the volume of transactions they engage in or changing the types of derivatives they use. However, very few organizations are moving away from using derivatives as a hedge for their financial risks.

Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.

Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM websites including PropertyCasualty360.com and Law.com.

Already have an account?

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Meg Waters

Meg Waters

Meg Waters is the editor in chief of Treasury & Risk. She is the former editor in chief of BPM Magazine and the former managing editor of Business Finance.

More from this author

Recommended Stories

Treasury & Risk

Join Treasury & Risk

Don’t miss crucial treasury and finance news along with in-depth analysis and insights you need to make informed treasury decisions. Join Treasury & Risk now!

  • Free unlimited access to Treasury & Risk including case studies with corporate innovators, informative newsletters, educational webcasts, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM publications including PropertyCasualty360.com and Law.com.

Already have an account? Sign In Now
Join Treasury & Risk

Copyright © 2024 ALM Global, LLC. All Rights Reserved.