Talking Shop: Derivative Regulatory Compliance in Hedging Programs

# Risk Management

# Foreign Exchange

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Member question: “Our hedging programs have trading entities in multiple jurisdictions requiring continual monitoring of derivative regulatory compliance regulation. This is mostly handled internally, leveraging external counsel to advise on specific topics and questions.

“How do others manage derivative regulatory compliance such as EMIR (European Market Infrastructure Regulation), FMIA (Financial Market Infrastructure Act) and others? Do you outsource, handle internally, hybrid solution or is it not applicable? Are there advisors that you would recommend?”

Peer answer 1: “My company is similar; predominantly navigated internally with legal’s assistance as needed.”

Peer answer 2: “Response from our derivatives manager:

“We monitor internally in treasury and at our regulated financial units (typically through either internal legal or accounting/compliance groups, and this in the past has sometimes been a reactive position rather than proactive).

“Sometimes the banks may notify us of a change; I’ve seen this in the onshore highly regulated markets due to the local complexities/language/access to regulation, etc.—Brazil, India, China, Thailand.

“For the US and European market regulations, there are a few representatives that have actively participated in the Coalition for Derivatives End-Users run by Gibson Dunn.”