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Regulation: What Impact on Interest Rate Derivatives?

The latest survey from Greenwich Associates finds that the majority of corporate interest rate derivatives users interviewed expect that new Basel 2.5 and III derivatives regulations in Europe and the US will result in wider spreads in derivatives markets and ultimately increase their costs of capital. Overall, a range of interest rate derivatives users participating in Greenwich’s survey say they believe the new capital requirements regarding derivatives trading will have little to no impact on current practices, or do not feel they have enough information about the regulations to make a meaningful assessment. Of those that are concerned about direct and indirect consequences of the regulations, most derivatives users seem willing to absorb the impact of wider spreads without reducing their level of trading activity, Greenwich finds. “It’s a much different story when it comes to margin requirements,” says Andrew Awad, a consultant with the Stamford-based research company. “A...

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