The Securities and Exchange Commission will adopt a rule early next year requiring companies to disclose potential losses from their derivatives holdings, an SEC commissioner said this week.

SEC Commissioner Steven M.H. Wallman, who has led the effort to fashion the rule, said the SEC will reject some businesses' request that they be allowed to craft their own measure of exposure to derivatives losses.

Instead, the SEC will give companies a choice of three methods to use in disclosing their holdings of derivatives, the financial instruments used to try to protect earnings from swings in interest rates, currencies and commodity prices, Mr. Wallman said.

"We now have aproposal that seems to work, with a goodamount of flexibility," Mr. Wallman said in an interview. "We've tried to strike a balance between investors' need for information and companies' concerns about releasing proprietary information."

The SEC staff is trying to complete its recommendations to the commission by the end of this month, Mr. Wallman said. The commissioners are likely to approve the plan in early 1997,he said, although they are still trying to meet with any businesses that want to convey their views.

The SEC started crafting the proposal following huge derivatives losses sustained by municipalities such as Orange County, Calif., and companies such as Procter & Gamble Co. and Gibson Greetings Inc.

Derivatives, whose value is tied to movements in underlying currency, commodity, or interest rates, can be used to hedge against losses or speculate in the market.

The SEC rule adapts a staff proposal issued a year ago forpublic comment. In one change intended to give companies more flexibility, the SEC would allow companies to use arange or average to estimate their "value at risk" over a yearlong period, rather than having to use a yearend figure, Mr. Wallman said.

Mark C. Brickell, a director of the International Swaps and Derivatives Association, said the move to impose the rule is premature, because the private sector has started disclosing far more information about its derivativesholdings in the last five years.

"Progress is so rapid, we believe it is too early to lock in a standard," said Mr. Brickell, who is a J.P. Morgan & Co. managing director.

The swaps association, made up of 300 companies, banks, securities firms, and government agencies, prefers that each company be allowed to use its own quantitative method to avoid compromising sensitive information, Mr. Brickell said.

The SEC rule would require companies to disclose their derivative accounting policies, describe strategic plans for the derivatives, and most controversially, make mathematical estimates of market risk.

Companies would be allowed to select one of three methodstocompute the risk:

*A listing of derivatives held,maturity dates, and cash flows a company expects to realize fromthem.

*Gains or losses that could result from hypotheticalchanges in market rates or prices.

*Potential losses over an extended period under awider set of assumptions.

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