Action Alert: Congress Needs to Hear From You on Derivatives Products

In recent months, both Congress and the White House have been intently focused on regulation of the over-the-counter (OTC) derivatives market. In addition to several bills that have been introduced which include regulation of derivatives, the House Financial Services Committee has recently announced that the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises will hold a hearing to discuss effective regulation of the OTC derivatives markets on Tuesday, June 9, 2009 at 10:30 am.

In preparation of this hearing, AFP is working with our colleagues at the Securities Industry and Financial Markets Association (SIFMA) to collect the names of companies that currently use derivatives products. A general statement outlining how companies use derivatives will be sent to the Committee’s leaders and we are asking AFP members to consider signing on. Click here to view a draft of the statement that will be submitted. If you would like to add your company to the list, we need to hear from you by 12 noon on Friday, June 5. A final version of the letter will be circulated after it has been sent.

AFP Position

AFP maintains that derivative products are essential and legitimate risk management tools that financial professionals rely on to help stabilize prices and mitigate risk. We fully support the enactment of legislation that encourages secure and transparent markets. However, AFP members have expressed concerns about the unintended consequences of mandatory clearing on hedging risk. We are concerned that legislation of derivatives might negatively impact the very sound interest rate and foreign currency exchange swaps and ultimately make it impossible to use these types of products.

Similarly, many of AFP’s financial accounting professionals have voiced concern over the possible conflicts between swaps regulation, mandatory standardized contracts and the strict rules of the Financial Accounting Standard Board. More specifically, some have expressed concerns over FAS 133 and a companies’ ability to demonstrate an effective hedge.

If you would like to add your company’s name to this statement, please contact AFP’s Government Relations Manager Jeanine Arnett at 301.961.8853 or via email at jarnett@afponline.org.