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Letter from The Coalition for Derivatives End Users to The Conferees for H.R. 4173

The Coalition for Derivatives End-Users represents thousands of companies across the United States that employ derivatives to manage risks that they face in connection with their businesses. We have a number of concerns with the derivatives title in the conference base text and urge you to support amendments that would move key provisions closer to the derivatives title that passed the House.

We appreciate all of the work that you and your colleagues have undertaken to craft legislation designed to create a safer, more transparent financial system. Throughout the legislative process, the Coalition has advocated for a strong derivatives title that brings full transparency to over-the-counter derivatives market; imposes thoughtful, new regulatory standards that enhance the stability of the financial system; and provides a strong, unambiguous exemption from mandatory clearing and bilateral margining for end-users.

While a new regulatory framework for derivatives is essential, so is a strong, clear exemption for end-users. Without such an exemption, we believe many end-users of derivatives would be forced to divert working capital away from productive use to margin accounts, move their hedging practices overseas, or forgo hedging altogether – leaving them exposed to the volatility and price uncertainty that OTC derivatives have so effectively mitigated. Moreover, end-users, who did not contribute to the financial markets crisis, should not be subjected to the same regulatory structure as swap dealers and others who do not use derivatives to reduce legitimate business risks.

For the businesses that employ residents in each of your states, this is not an academic exercise; it is a jobs issue. A survey and analysis conducted by the Business Roundtable and Keybridge Research found that a requirement to impose initial margin on OTC derivatives could lead to a loss of 100,000 to 120,000 jobs within S&P 500 companies alone. The additional impact of variation margin could significantly increase this negative impact on jobs.

Previously, we have provided to House and Senate members draft amendment text that would fix many of the anti-business provisions in the two bills. Attached, we list, in no specific order, our greatest concerns with the derivatives title in the conference base text.

We hope that you will keep our views in mind as the conference proceeds and that we can support the final product of your deliberations. We share the goals of transparency and increased market stability and stand ready to work with you to achieve them.

Sincerely,

American Petroleum Institute
Business Roundtable
Financial Executives International
Information Technology Industry Council
National Association of Corporate Treasurers
National Association of Manufacturers
National Association of Real Estate Investment Trusts
The Real Estate Roundtable
U.S. Chamber of Commerce

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