Hedge funds with exposure to interest rate swaps and other derivatives pay considerable fees to clearing brokers and futures commission merchants to clear such derivatives.  Further, changes in the relevant regulatory environment – including Basel III, MiFID 2 and the U.S. and U.K. clearing mandates – may result in significant fee increases.  In an effort to minimize such fees, hedge funds are exploring strategies such as netting and compression of interest rate swaps.  The Hedge Fund Law Report recently interviewed Tom Lodge, Partner at London-based Catalyst Development Ltd., on the impact of regulatory changes on clearing broker and futures commission merchant fees and the benefits and costs of netting and compression strategies.  See also “CFTC Issues Guidance for Completing Annual CCO Reports of Swaps and Futures Firms,” Hedge Fund Law Report, Vol. 8, No. 1 (Jan. 8, 2015).