UPDATE 1-CFTC approves CME data warehouse application

Wed Nov 21, 2012 4:38pm EST

* CME had sued CFTC to avoid giving data to rivals

* Two CME rivals already had approval in hand

* Swap data repositories (SDRs) required under Dodd-Frank

By Douwe Miedema

WASHINGTON, Nov 21 (Reuters) - A U.S. regulator on Wednesday granted exchange operator CME Group Inc approval to run a new type of data warehouse required under U.S. financial reform rules.

The CME, the country's largest operator of futures exchanges, was the third company granted permission to register as an official data repository, the Commodity Futures Trading Commission (CFTC) said.

Earlier this month, the CME sued the CFTC due to frustration that the agency had not yet ruled on its application to run a swap data repository, or SDR.

Two CME rivals, the Depository Trust and Clearing Corporation (DTCC) and the Intercontinental Exchange, had already received approval to run SDRs, meant to shed greater light on swaps trading, a $650 trillion, largely unregulated financial market that were at the center of the 2008 financial crisis.

The CME, which sued the CFTC to avoid having to report transaction data to either of these two rivals, could not immediately be reached for comment on whether the lawsuit would continue.

Swaps - a catch-all phrase for many kinds of often highly complex and lightly regulated financial instruments - will need to be traded on exchange-like platforms, in what is expected to lead to a substantial overhaul of the business.

They will in large part also need to be cleared, and transaction data will need to be centrally stored in data warehouses. The CME does not trade swaps, but it does offer clearing services for these instruments.

The spat with the regulator is one of a growing number of legal of challenges to the 2010 Dodd-Frank law, designed to shed greater light on the commercially lucrative derivatives business and prevent a repeat of the global crisis.

The derivatives industry successfully challenged another CFTC rule in September, when a judge decided the watchdog had no mandate to introduce a new rule to curb speculation in commodity markets by putting caps on trading positions.

But the industry is divided about the CME's lawsuit. One leading lobby, the International Swaps and Derivatives Association (ISDA), has distanced itself from the case.

DTCC has filed a motion saying the CME's lawsuit could disrupt the regulatory regime, seeking leave to intervene in the case before federal court in Washington D.C.

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.