Firms That Hedge Face Prospect of New Costs
Author: Scott Patterson</br></br>Companies from airlines to oil drillers to fast-food chains could see some costs climb as a result of the financial-overhaul bill, even though those industries weren't at the center of the credit crisis.</br></br>The bill agreed to early Friday by lawmakers will force financial firms, which use derivatives to bet on the direction of everything from the price of oil to interest rates, to trade most of these complex financial instruments on an exchange and process them through a central clearinghouse.</br></br>So-called end users, which use derivatives to hedge against risks such as a jump in oil or corn prices, will be swept up in these changes, though many questions remained late Friday about the exact impact.</br></br>The counterparties of derivatives trades made with end users, or the dealers that buy and sell derivatives, might be required to put up an extra chunk of cash when entering into a trade with a nonfinancial firm, or when a trade moves against them. That could lead to higher prices for the contracts, because dealers likely will try to pass along their additional expenses.