By Joe Siu, Chatham Financial
Regulators propose sweeping margin rules for all OTC derivative users.
Nearly a year ago, in the wee hours of the morning of June 25, 2010, members of the House and Senate were negotiating the final details of the Dodd-Frank Act. In a brief moment of confusion, key text was deleted from the final bill, which would have unambiguously exempted end users from a mandatory margin requirement for their non-cleared hedges. Legislators subsequently realized their mistake and tried to rectify it with a series of floor statements and correspondence intended to clarify their intentions. But the damage was done. End users feared the resulting legislative ambiguity could give regulators far- reaching authority to force companies to divert substantial amounts of working capital into margin accounts.