Corporate hedgers fear OTC liquidity drain
Increasing costs could force some end-users to abandon hedging, hurting swap market liquidity and forcing other firms to follow suit
Increased regulatory and capital requirements on banks could result in a dangerous, downward spiral in over-the-counter markets, with some end-users abandoning certain products because of cost, which would hurt liquidity and force others to follow suit.
"If costs increase, there will be less OTC availability, which is a huge problem for end-users. It would do serious damage. And less availability would impact liquidity and increase costs further, resulting in less derivatives hedging, which will
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