Two Republicans and a Democrat have joined Democrat Congressman Bill Owens to introduce a bill in the House of Representatives to alter a provision on derivatives in the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Michael G. Grimm (R-NY), Gary Peters (D-MI), Austin Scott (R-GA), along with Owens, introduced the Business Risk Mitigation and Price Stabilization Act of 2011 (H.R. 2682), a bipartisan bill to clarify that true end-users of derivatives are exempt from the margin requirements applied by the Dodd-Frank Act to many derivatives contracts.

This exemption will allow end-users to continue to use derivatives in an attempt to “maintain low and stable prices for consumers and will free up capital that can be used to create jobs and keep American companies competitive,” a joint announcement said.

“Upstate New York end-users use swaps to responsibly manage risk and reduce price volatility for their customers,” Owens said. “This legislation will ensure that community banks, agriculture co-ops and energy utilities can continue to hedge that risk.

“Avoiding this burden and cost on upstate job creators will free up capital that can be invested in economic development and putting people back to work.”

Derivatives end-users are companies that use them to manage an actual business risk - generally to hedge against fluctuating prices, currency rates, or interest rates - and not to speculate, the announcement said.

This bill clarifies that end-users employing derivatives to hedge legitimate business risk are exempt from posting margin, consistent with congressional intent of Dodd-Frank.

The statement goes on to say that “forcing true end-users to post margin can have several negative consequences: 1) the costs of hedging could be become so high that they stop hedging, resulting in a detrimental rise in prices for consumers; 2) capital will be restricted that would otherwise be used for job creation or reinvestment to make American companies more competitive in the global economy; and 3) high costs of hedging could drive business overseas to foreign derivatives markets. H.R. 2682 eliminates the margin requirement and thus helps prevent these negative consequences from occurring.”