NEW YORK (TheStreet) -- Worries about how the euro's swing will impact multinational, blue-chip corporations also highlight the way financial regulatory reform will reach beyond Wall Street.
Congress is still haggling over the measures that will be included in a wide-ranging reform bill which aims to restructure the way banks operate. One issue in particular -- derivatives -- has gotten a lot of attention. That's partly because derivatives are used by a wide array of businesses, from Coca-Cola (KO) to Delta (DAL) to Nike (NKE), to protect their core results. Products like swaps, options and futures allow non-financial firms to concentrate on growing the business instead of worrying about currency, interest-rate and commodity price fluctuations.
Sen. Chris Dodd (D., Conn.), who structured the bill now being negotiated, has proposed that these plain-vanilla derivatives be traded on an exchange. Such a move might garner better derivative-product pricing for the Cokes and Nikes of the world, but it may also raise the cost of doing business with banks, since their costs of compliance will rise.As a result, corporate lobbying groups have been fighting against measures that would put derivatives on openly traded exchanges. The Coalition for Derivatives End-Users, which includes the Chamber of Commerce and other entities, recently issued a statement arguing that its corporations shouldn't have to foot the cost of financial reform. The group supports an amendment by Sen. Saxby Chambliss (R., Ga.), which would exempt common over-the-counter derivatives from clearing requirements and higher margins. "If implemented, we believe many end-users of derivatives would be forced to divert precious working capital away from productive use to margin accounts, move their hedging practices overseas, or forego hedging altogether -- leaving them exposed to the volatility and price uncertainty that OTC derivatives have so effectively mitigated," the coalition said. Perhaps more importantly, the euro contagion shows why derivatives are important -- not just to banks, but to corporate America as well.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV