Lobbyists have been pressuring White House officials in an attempt to make sure that new regulations affecting derivatives do not create substantial cost increases associated with using the risk management tools to hedge against fluctuating energy values.

Before regulators draft the rules that will be needed as a result of adopting Dodd-Frank, the industry representatives have requested that officials consult the Commodity Futures Trading Commission, according to The Hill.

Energy firms are worried about bearing the cost of regulations that are designed to reduce speculative use of derivatives. The entities representing these corporations worry that users of derivatives will need to pay higher costs associated with collateralization and margin, the media outlet reports.

Various industry groups including the Natural Gas Supply Association, the Electric Power Supply Association, the Independent Petroleum Association of America co-authored a letter to the White House, expressing concerns that "currently, the CFTC’s proposed swap dealer rule is overly broad and would result in commercial end-users who use swaps to hedge their commercial risk and reduce price volatility for their customers being misclassified as swap dealers," according to the media outlet.

Data provided by Risk Magazine indicates that 48 percent of renewable energy companies use energy derivatives. 

Singapore's central bank has proposed requiring that OTC derivatives be cleared centrally by the end of 2012, and has requested comments from market experts on this plan.

The Monetary Authority of Singapore released a consultation paper on February 13, which proposes expanding the authority of the Securities and Futures Act so all OTC derivatives that are traded or booked in Singapore will be required to be centrally cleared and reported, according to Channel NewsAsia.

The proposed regulations are designed to lower systemic risk. Chia Woon Khien, head of local markets strategy and emerging Asia at the Royal Bank of Scotland, stated "this came about (during) the G20 summit in September 2009 after the Lehman crisis, where the finance ministers from the G20 group came together and proposed a central clearing system to minimize this counterparty risk when…one major party – like Lehman – collapsed and it caused a domino effect, caused a near collapse of the entire system," according to the media outlet.

The new laws for the financial instruments are also meant to provide regulators with more information on trading activity. Singapore's OTC derivatives market currently has a notional value of $9.8 trillion, Reuters reports. 

Adopting the Solvency II requirements will result in the closure of defined benefit schemes and subsequently create substantial job loss, various lobbying groups have warned.

The Confederation of British Industry, the National Association of Pension Funds and the Trades Union Congress collaborated on a letter that was authored and then sent to European Commission President José Manuel Barroso, as well as Commissioners Rehn, Barnier and Andor, according to Professional Pensions.

The government officials wrote that implementing Solvency II will force remaining defined benefit plans to close, and will adversely affect economic growth by diverting capital away from investments into job creation and research, Money Marketing reports.

The letter stated its support of making sure that pension scheme members "benefit from risk-related regulation," according to the media outlet. However, it insisted the plan proposed by the Commission are not the right ones for achieving this goal. "By demanding dramatic increases in funding from employers, the Commission's plans would – at best – force all remaining defined-benefit schemes to close and – at worst – push many businesses into insolvency, leading to significant job losses."

Market experts have estimated that implementing the regulations could cost the U.K. economy up to £1 trillion pounds, the media outlet reports. 

The Canadian Securities Administrators (CSA) released a statement on February 10, which indicated that it was seeking comments on a recently published paper on OTC Derivatives. The CSA has requested that market experts provide their input up until April 10.

The paper delineates the proposals of the CSA Derivatives Committee related to collateralization of OTC derivatives. The consultation paper pertains to customers that work with central clearingparties (CCPs) through clearing members.

The paper addresses how assets used as collateral by these market participants are segregated.

As international regulations will soon require that more derivatives be cleared through CCPs, the smooth functioning of these financial organizations is crucial to the stability for the derivatives market and protecting entities involved in trades.

"The CSA is committed to establishing a comprehensive framework for the regulation of OTC derivatives that serves the needs of market participants and is consistent with Canada's international commitments," Bill Rice, chair of the CSA as well as chair and chief executive officer of the Alberta Securities Commission, said in the statement.

A study recently published by Greyspark Partners indicated that requiring OTC derivatives to be cleared through CCPs would make the operations of market participants using the clearinghouses more uncertain, according to Risk Magazine.
 

European Union officials should establish a more concrete timeline for adopting the Solvency II requirements, European Insurance and Occupational Pensions Authority chairman Gabriel Bernardino stated on February 9, according to Dow Jones Newswires.

In a letter recently sent to Michel Barnier, the European commissioner for internal market and services, the official warned that failing to gain more clarity on a timeline for adopting the rules could cause different nations to instate varying policies, Risk Magazine reports.

The recent decision made by the European Parliament to delay a vote on the Omnibus II Directive will push back the implementation of Solvency II, according to Dow Jones Newswires. The outcome of the vote is crucial to how Solvency II will be implemented.

"Further uncertainties and delays increase the risk of a postponement of Solvency II and in turn the benefits of a risk-based supervision and enhanced risk management that Solvency II will bring," Bernardino stated in a speech he gave at Frankfurt University, the media outlet reports.

Aside from the risk of complications due to regulations that are not uniform, market experts at BNP Paribas have released a study indicating that many European insurers are having a hard time adopting effective risk governance procedures, according to Asset Servicing Times.