The financial IT firm’s boss will try to sway an outspoken critic of the corporate exemption from within.
It’s either a case of releasing a fox in the henhouse—or setting a hen among the foxes. Jiro Okochi, chief executive of end-user derivatives technology provider Reval, has been appointed to the Global Markets Advisory Committee of the Commodity Futures Trading Commission, which advises the regulator on market issues and practices. Mr. Okochi, an outspoken proponent of regulatory exemptions for corporate hedging activities, could have an uphill battle in pressing the end-users’ case. After all, the CFTC’s boss, Gary Gensler, is one of the biggest regulatory opponents of such exemptions.
Reval has good reason to want to protect end-users’ OTC flexibility. After all, his firm counts some 375-plus companies among the clients of its hedge accounting and risk management product. GMAC might be a good place to start, as its very purpose is to inform the CFTC about issues that affect the “integrity and competitiveness of US markets and US firms engaged in global business,” according to its charter.
In a similar effort, Mr. Okochi appeared on December 2 before the US Senate Agricultural Committee to offer users’ view of derivatives. In that testimony, he pointed out that non‐financial corporations were not the cause of the financial crisis and that corporate users, particularly Reval clients, utilize OTC derivatives only to hedge business risks and not to speculate.
At the moment many in the Senate—including Chris Dodd, chairman of the Banking Committee—think a corporate exemption could be exploited by dealers (see “Mixed Bag for Derivatives End Users,” IT, December 2009), so Mr. Okochi’s attempt to illuminate the darker corners of the derivatives market could prove difficult. Nonetheless, having a strong pro-hedging voice within the CFTC can only help end-users make their case.