UPDATE 2-U.S. court OKs part of DTCC lawsuit against CFTC

Mon Mar 10, 2014 5:05pm EDT

By Aruna Viswanatha

WASHINGTON, March 10 (Reuters) - Parts of a lawsuit filed by the Depository Trust & Clearing Corp against the top U.S. derivatives regulator in a fight over swaps data will be allowed to proceed, a U.S. federal judge ruled.

The DTCC sued the Commodity Futures Trading Commission over the way it allowed DTCC rivals CME Group Inc and IntercontinentalExchange to gather potentially lucrative swap trading data.

U.S. District Judge Amy Jackson dismissed three claims in the DTCC lawsuit and said the court could not review them because the allegations did not deal with any final action by the CFTC, according to an order on Monday.

Underlying the dispute is a struggle between Wall Street, represented by the DTCC, and Chicago's powerful commodity trading companies over who will control swaps data.

The 2010 Dodd-Frank Wall Street reform law called for the creation of swap data warehouses tasked with storing all transactional trade data for over-the-counter derivatives to help regulators police the market for potential abuses.

The DTCC filed its lawsuit last May after the CFTC gave the two futures exchanges the OK to send client data to their own proprietary data warehouses.

A swap is a financial instrument that derives its value from something else, such as an interest rate, and is typically used to hedge against potential future risks.

DTCC, a financial services group controlled by investment banks that deals in post-trade transactions, operates its own rival data warehouse and said the CFTC's decision is anticompetitive. DTCC wants clients to have the choice where their data go.

One of the DTCC claims Jackson dismissed dealt with some revisions the CFTC made in answers to frequently asked questions that it had posted on its website to help guide the industry.

The other two claims targeted a rule by ICE that went into effect automatically through "self-certification," a process that fast-tracks rule approvals if the CFTC opts not to act on it.

Jackson said only "final agency actions" are reviewable by the court under the Administrative Procedure Act, a law that governs how federal agencies draft rules.

Under that reasoning, she did allow DTCC's claims against a similar CME rule to move forward because the CFTC had approved that rule through a formal rulemaking process.

"We are pleased that the judge has given the green light to the core of our case," DTCC general counsel Larry Thompson said in a statement. "We continue to believe that CME Rule 1001 is anticompetitive and undermines the core pro-competitive principles of the Dodd-Frank Act."

A CFTC spokesman had no immediate comment.

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