The specific rules on derivatives trading are being set now, and the debate is hot. The CFTC has been tasked with writing them and it will hold an open meeting Oct. 1.

One issue that has already emerged is how so-called major swap participants will be defined. This is important because companies in this category will be required to have higher capital cushions and adhere to new business conduct standards if they want to continue to hedge via derivatives. Financial companies, of course, will be required to hold much more collateral.

Companies that legitimately hedge, as opposed to bet, via derivatives are concerned they will be required to post new collateral, even though the framers of the law stated often that legitimate hedgers will be exempt. So this may amount to a bit of posturing.

We have noted there is often a fine line between hedging and speculating. Companies that aggressively hedge against commodity prices, currencies and the like, can easily get burned if the market moves the other way. At that point, the losses mount; they end up the equivalent of bets.

There's going to be many rules coming soon over clearinghouses and the likes. A lot is on the line. We've covered the clearinghouses quite a bit over on FierceFinanceIT.

For more:
- here's the article

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