Hit or Miss: Regulating Derivative Markets to Reduce Hedging Costs at Non-Financial Companies

John E. Parsons,

January 2013

Derivative markets are an important tool enabling non-financial companies to reduce their risk and manage their financing. Effective regulation of these markets can lower companies hedging costs and help improve productivity. Ineffective regulation can raise costs and reduce productivity. In this testimony, I address what type of action is likely to be effective in reducing hedging costs at nonfinancial companies and what type of action is likely to be ineffective or counterproductive.