A proposed bankruptcy reform bill that has cleared both houses of the U.S. Congress contains cross-product netting provisions that are crucial for the derivatives community. "It expands the scope of assets and transactions that can take advantage of cross-product netting, and clarifies its enforceability," said Paul Saltzman, general counsel at the Bond Market Association, according to DW sister publication BondWeek. For example, though Saltzman says a strong argument could currently be made for netting out an interest-rate swap and a repurchase agreement, passage of the legislation would make netting those different products much easier.
There are still some kinks in the bill that representatives from the Senate and the House of Representatives must work out before it can be sent to President George W. Bush for his signature. The selection of the committee that will work out the issue has been stalled due to political wrangling that transcends this particular bill.
