An amendment that would strengthen regulation of over-the-counter derivatives, also know as OTC, passed the U.S. House this week. It was part of a financial regulatory reform bill.

The bill (H.R. 4173), known as the “Wall Street Reform and Consumer Protection Act of 2009,”  preserves the use of derivatives for end users to hedge price risks associated with their businesses while establishing a central clearing requirement for participants in the over-the-counter derivatives market.

The amendment exempts from the clearing requirement commercial end users such as manufacturers, airlines and other small- to medium-sized businesses that often use derivatives markets to hedge their price risk. It was the result of an agreement reconciling separate versions of derivatives legislation passed by the House Agriculture and Financial Services committees earlier this year. 

Source: National Pork Producers Council