"Corporate treasurers have long used derivatives hedging to bring stability and predictability to their financial position. Now the safety net is riddled with holes, thanks to uncertainty about global regulation of cross-border transactions." writes Luke Zubrod for TREASURY & RISK.

Zubrod continues, "As regulators labour toward harmonizing their approaches domestically and internationally, corporate treasurers must begin working through the practical implications of the current proposals. In the absence of clear and final guidance, many are assuming that their transactions will be subject to both U.S. and European laws, as well as rules in some other jurisdictions such as Singapore, Japan, Hong Kong, and Australia, which are largely lagging behind the U.S. and Europe. Such an approach dictates understanding the requirements imposed by each regime and, for every derivatives transaction, comparing the requirements in each rule category for the jurisdictions the transaction falls under. When treasurers identify which regime's requirements have the highest standards and nearest-term compliance deadlines for each rule or rule category, they can prepare to comply with the most stringent demands in each category, a "worst of all worlds" scenario.

An inevitable conclusion when performing such an analysis is that life is simplest for companies that don't cross borders—and this conclusion makes clear just what's at stake with cross-border derivatives regulation. Some businesses will likely be overwhelmed by the complexity inherent in cross-border transactions, and few companies are going to subject themselves to a worst-of-all-worlds compliance regime without seriously considering the alternatives. Where possible, they're likely to choose to transact with banks in their own jurisdictions."

Read more in the full article - recommended - here.