The UK Association of Corporate Treasurers (ACT) has updated and reissued its guidance for non-financial companies on the regulation of over the counter (OTC ) derivatives. It includes information on the regulations, intra-group trading, reporting to trade repositories (TRs), and risk mitigation practices.
While most non‐financial companies’ hedging is expected to be outside the requirement to put OTC derivative transactions through central clearing (and so will not be obliged to put up margin to cover the daily mark-to-market valuation) the guidance suggests that companies may want to consider reducing their risk on their counterparty bank by signing a Credit Support Annex and exchanging bilateral collateral.
“This will also reduce the counterparty’s contingent credit risk so that the company can obtain more favourable pricing for the derivatives,” it says.
The document includes an appendix detailing the 85 data fields that make up the reporting requirements.
The ACT's guidance can be downloaded from their website by clicking here.