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OTC reforms to be softer

FIRMS that trade in over-the-counter (OTC) derivatives look set to win an important exemption under plans to overhaul the market, according to draft legislation that is working its way through the US Congress. <br /><br />Lawmakers in the US had planned to introduce rules that would have seen all standardised OTC derivatives processed through clearing houses in a bid to minimise risks to the financial system. <br /><br />But the draft bill includes a caveat that says OTC swaps would not need to be cleared if &ldquo;one of the counterparties to the swap is not a swap dealer or major swaps participant&rdquo;, in a coup for large manufacturing, commodities and transport groups that use the derivatives to hedge against currency movements, interest rates and commodity prices.