Rep. Davidson introduces bill to reduce regulations on derivatives transactions

Legislation to put U.S. companies on equal footing with European counterparts when trading derivatives was approved by the House Financial Services Committee this week.

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The Derivatives Fairness Act (H.R. 5323) amends the Dodd-Frank Wall Street Reform and Consumer Protection Act to exempt non-cleared derivatives transactions with end-users from the Credit Valuation Adjustment capital charge. It would add a new section to Dodd-Frank Act, section 177 entitled “Credit Valuation Adjustment.”

This will ensure that U.S. companies are on a level playing field with European companies, which pay less for derivatives, the measure’s sponsor, Rep. Warren Davidson (D-OH), said.

“The Derivatives Fairness Act is a real-world solution that provides a level playing field, and further relief, for businesses in Ohio and across the country who are digging out from the regulatory overreaches of Dodd-Frank,” Davidson said.

Davidson said that while Dodd-Frank Act was designed to exempt end-users from most of its regulations, that’s not the case. Many end-users that did not cause the financial crisis have had to deal with increased regulations. He said Congress should make sure that regulators are not imposing unnecessary regulations on them.

It passed in the House Financial Services Committee by a vote of 34 to 26 and now heads to the House for a full vote.