By Douwe Miedema
WASHINGTON May 2 Depository Trust & Clearing Corp (DTCC) sued the top U.S. derivatives regulator over the way it has allowed two DTCC rivals to gather potentially lucrative swap trading data.
The Commodity Futures Trading Commission has given two futures exchange - CME Group Inc and IntercontinentalExchange - the nod to send client data to their own proprietary data warehouses.
DTCC - a financial services group controlled by investment banks that deals in post trade transactions - operates its own data warehouse and says the CFTC decision is anti-competitive. DTCC wants clients to have the choice where their data go.
"The commission failed to properly consider the anticompetitive effects of (the rules), and did not comply with the legally required administrative or cost-benefit analysis procedures," DTCC said in a statement.
Underlying the spat is a fight between Wall Street and Chicago's powerful commodity traders over who will dominate the swaps data business. Traditionally, a swap is the exchange of one security for another.
The CFTC is under siege from a rising number of lawsuits as it rushes through a flurry of new regulations mandated by the 2010 Dodd-Frank overhaul of Wall Street.
Last month, data vendor Bloomberg LP filed a lawsuit against the agency to fight a new rule that would make the trading of swaps more expensive.
The CFTC, led by former Goldman Sachs banker Gary Gensler, is writing rules for the $650 trillion swaps market, which critics say contributed to the 2007-09 credit meltdown by hiding huge risks from regulators.
Under the new rules, swaps will need to be traded through clearing houses, which stand between buyers and sellers to absorb risk and make trading safer.
Positions also will need to be reported by these clearing houses to so-called Swap Data Repositories (SDR), to give regulators more insight into the market. DTCC, ICE and CME each operate an SDR.
But while the CME and ICE operate their own clearing services, DTCC has to rely instead on LCH.Clearnet, which is being bought by the London Stock Exchange, to receive sufficient data in its SDR.
DTCC dominates the interest rate swaps segment because of its close ties to investment banks, while ICE is by far the biggest clearer of credit-default swaps.
The CME has no such dominant position but hopes to build up substantial market share in new areas.