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The European Parliament risks treating all derivative products the same way, rather than differentiating between products based on their complexity and the systemic risk they pose, Kay Swinburne MEP has warned today after the Economics and Monetary Affairs Committee held its first discussion on regulating Derivatives.
Dr Swinburne, who is the European Conservatives and Reformists group's coordinator on the committee, pointed out that futures contracts have been used by merchants in trading for centuries. She also called for an exemption for end-user corporate transactions which account for 14 percent of the total derivatives transactions.
She said:
"I have met many companies in my Welsh constituency recently who actively use derivative instruments - often simple but tailored contracts - to manage their business risks. There is universal concern over the plans to move towards standardisation and fully cleared derivative contracts which will mean increased collateralisation.
"Any future legislation should include an end-user exemption so that European corporations are not disadvantaged vis-à-vis their global competitors.
"Companies who use derivatives to reduce risk in the economy do not contribute to systemic risk in the financial system and should be treated differently. Once again we are seeing legislators failing to fully grasp what they are legislating."
