Non-financial companies have hit out at EU plans to regulate derivatives markets, saying a draft now passing through the European Commission will harm economic activity. In a communication released on 20 October 2009 (COM(2009)563, see Europolitics 3843), the Commission set out its intention to force standardised products currently traded privately (over the counter, OTC) on to central exchanges. Those companies wanting to exchange derivatives privately will have to cough up cash collateral to cover them in case of a future market collapse.

But non-financial companies represented by the European Association of Corporate Treasurers (EACT) appealed to commissioners in an open letter, on 6 January, to throw out the cash collateral provision. "We strongly urge you to preserve the ability of companies to manage their financial and market risk exposures by ensuring continued access to reasonably priced and customised over-the-counter (OTC) derivative products," they wrote.

Derivatives are complex financial products, whose value is based on underlying...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT