U.S. dispute over derivatives trading data heats up

WASHINGTON Thu Jan 17, 2013 3:21pm EST

WASHINGTON (Reuters) - A conflict over potentially valuable derivative trading data heated up on Wednesday, underlining how an overhaul of Wall Street after the financial crisis is sparking acerbic competition battles.

The Depository Trust & Clearing Corporation (DTCC), which performs back-office functions for investment banks, threatened to sue the top U.S. derivatives regulator over how rival CME Group Inc plans to handle the data.

The DTCC wants to prevent CME, which operates the world's largest futures exchange, from automatically reporting swaps data into its own data warehouse when it is obtained from clients using CME's clearing services.

The CME has asked the Commodity Futures Trading Commission to approve its rule governing the practice, which it has dubbed rule 1001, but has met fierce resistance from the DTCC and from investment banks.

"DTCC is keeping all of our options open for opposing proposed rule 1001, including litigation," DTCC general counsel Larry Thompson told a news conference.

CME and the CFTC both declined to comment. It is not clear if and when the CFTC will approve the CME's rule-book.

Data reporting is a central tenet of new global rules to regulate the $650 trillion swaps industry, drawn up after the 2007-09 financial crisis brought to light systemic flaws in the market, including a lack of data.

Swaps will now need to be traded on exchange-like platforms, with central clearing houses standing in between buyers and sellers to reduce risk, and with data reported to regulators, and also partially to the public.

LCH.Clearnet, which is being bought by the London Stock Exchange, dominates interest rate swap clearing, while the Intercontinental Exchange is the biggest player by far in clearing credit default swaps.

The CME has no dominant position in either of these two huge products, but could still build up substantial market share in areas that will need to be cleared in the future because of the tighter new rules.

Its rule 1001 says that any transaction that runs over its clearing house will be reported to its own swaps data repository. If a client chooses, CME will also share the data with Intercontinental Exchange or the DTCC, though it is not clear how much that will cost.

(The story corrects to "CME's clearing services" from "DTCC's clearing services" in paragraph 3)

(Reporting by Douwe Miedema; Editing by Leslie Adler)

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