WASHINGTON Jan 16 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 DTCC'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
"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.