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Derivatives

Norwegian Regulator To Allow OTC Investments

The Kredittilsynet, Norway's financial regulator, has drafted new legislation that would allow Norwegian fund managers to invest in over-the-counter derivatives for the first time and free up as much as EUR4.5 billion (USD4 billion) for OTC instruments. Ellen Jakobsen, advisor to the regulator in Oslo, said it has put out a draft of the revised securities rules and is now taking recommendations from the industry. The regulator expects to submit a final draft of the derivatives-specific legislation, which would allow asset managers to invest up to 10% of their portfolios in unlisted securities, to the Ministry of Finance for approval by spring, she said. Funds can currently use only exchanged-traded equity derivatives.

In its current form, the legislation would allow funds to use forward contracts but would still prohibit them from entering interest-rate or foreign exchange swaps. However, an official at the country's mutual fund association, or Verdipapirfondenes Forening, said it has petitioned for interest-rate and fx swaps to be allowed and the regulator has agreed to include them in a reworked version. "The main reason this is happening is the Norwegian market is highly penetrated by foreign companies who sell into Norway and they have regulations that are more flexible. We are hoping to give Norwegian fund managers a level playing field," he said. The Ministry of Finance is likely to approve the expanded use of the derivatives, according to Tore Mydske, deputy director general at the ministry in Oslo.

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