WASHINGTON — Companies that trade derivatives solely to guard against volatile price swings won’t have to meet new federal collateral requirements.
The Commodity Futures Trading Commission advanced the exemption Tuesday as part of new regulations for derivatives, investments whose value depends on the future price of some other investment.
The rules, which were included in last year’s financial regulatory law, require banks and businesses that trade derivatives to put up millions of dollars to cover their losses. The aim is to cut down on the kind of risky trades that contributed to the 2008 financial crisis.
But airlines, oil companies and farmers are among hundreds of businesses that won’t be required to do so, if they use derivatives to control unforeseeable costs, such as extreme weather that damages crops.
Also Tuesday, five other regulatory agencies, including the Federal Deposit Insurance Corp., the Federal Reserve and the Treasury Department’s Office of the Comptroller of the Currency, advanced collateral and capital requirements for the banks and other financial institutions they oversee.
Lawmakers blamed the $600 trillion derivatives market for hastening the financial meltdown and added new regulations when they passed the financial overhaul last year.
The rules proposed Tuesday apply to derivatives traded outside of clearinghouses. Clearinghouses settle derivatives trades, and their member firms must back them, so collateral is always required. Regulators expect that the majority of derivatives trades will occur in clearinghouses.
More than 200 major U.S. companies that use derivatives, including Ford, Boeing, General Electric and Shell Oil, have lobbied in coalitions for an exemption from the collateral requirements. Powerful lawmakers from both parties have supported the exemption and pressed regulators to adopt it.
