BP plc (NYSE:BP) (LON:BP) has officially registered to be a derivatives dealer in the U.S., reports the Financial Times’ Gregory Meyer. The oil giant did so under a number of rules which are attempting to prevent another global financial crisis. The company is the first in the energy sector to officially acknowledge the role it plays in the derivatives market as a trader. BP’s sheer size is certainly big enough to cause greater regulatory scrutiny.
New Regulatory Rules Regarding Derivatives
The new rules require companies which deal $8 billion or more in derivatives swaps annually to register. Upon registration, the companies then must keep their capital and margins at minimum levels and conduct business according to certain standards. There are also new reporting regulations that must be followed.
Regulators have cited Enron’s derivatives dealer status right before its collapse in 2001 as being justification for why non-bank derivatives dealers should be regulated.
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BP As A Derivatives Dealer
Integrated Supply & Trading, BP plc (NYSE:BP) (LON:BP)’s in-house commodities trading arm, is one of the biggest commodities traders in the world. It trades both in derivatives and physical market. In past years, this division of BP has raked in billions of dollars in profits, although it has struggled recently.
BP Energy, a subsidiary of the oil giant that’s based in Houston, reportedly showed up on the derivatives swap dealer registry today after Cargill. At the end of 2012, BP’s annual report showed that its derivative assets were worth around $4.5 billion.
Currently the 80 or so dealers which have registered are various units of major banks like Goldman Sachs and Barclays. Regulators expected more commodity companies like BP plc (NYSE:BP) (LON:BP) to register, although the energy derivatives market has changed since Enron went through its transformation. Now experts say it’s unlikely if there will be any more than five derivatives dealers registering this year which aren’t financial entities.