Some U.S. Companies Will Receive Pass On New Rules, Geithner Says

Posted: Updated:
GEITHNER RULES

WASHINGTON -- Treasury Secretary Timothy Geithner has decided to let companies continue to trade certain contracts used to guard against swings in currency values outside regulators' view.

New rules require that many such trades occur more transparently, on exchanges where regulators can see them. But Geithner is exempting certain contracts used by companies to hedge currency rates.

The new financial overhaul law authorized Geithner to carve out such an exemption to stricter regulation.

Business groups argue that tighter oversight of such contracts would be costly and unnecessary. But critics, including some regulators, counter that the entire market for financial contracts called over-the-counter derivatives should face stricter supervision.

The value of derivatives hinges on an underlying investment, such as currencies, stocks or mortgages. Speculators using over-the-counter derivatives helped fuel the 2008 financial crisis.

Treasury's top markets official said the contracts already include many of the safeguards imposed by the new rules. For example, information on the price for each contract is available from a number of sources. The contracts often are traded on electronic platforms.

Imposing new rules would mean "introducing an additional process into what is a very well-functioning market today, and you would be putting more steps into the settlement process," said Treasury's Assistant Secretary for Financial Markets Mary Miller.

The swaps that Geithner carved out account for about $30 trillion of the $600 trillion global market for over-the-counter derivatives, Treasury said. The new rules will apply to currency swaps, options and other contracts used for similar purposes.

The decision technically is a proposal. Treasury will accept public comments for 30 days before finalizing the exemption.

Around the Web

Obama's 'Volcker Rule' shifts power away from Geithner ...

FT.com / US / Economy & Fed - Geithner urges EU fund rules rethink

Geithner Warns E.U. on Hedge Fund Rules - NYTimes.com

Treasury exempts forex market from costly rules

Senate's Hatch Urges Dodd-Frank Delay to Set Global Coordination