Dealers baulk at new SME derivatives rules
New structured product disclosure requirements are set to capture small and medium-sized firms’ derivatives trades, forcing new costs onto banks and revealing profit margins to clients for the first time
Derivatives are often seen as the preserve of sophisticated financial institutions and large corporations. Yet small and medium-sized enterprises (SMEs) use these tools to regulate their cashflows and hedge against future turbulence in their rates or foreign exchange exposures.
These companies often use derivatives to hedge forex flows or the interest rate component of their loans, for instance. But proposed European regulation may treat these instruments in the same way as retail structured
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