CHICAGO CME Group on Thursday pulled its lawsuit against the Commodity Futures Trading Commission after the U.S. regulator withdrew rules that would have stopped CME from warehousing data generated by its swaps clearing business.
New CFTC rules require most contracts in the opaque $650 trillion swaps market to be reported to a data repository to remedy a lack of transparency in the swaps market that critics say exacerbated the global financial crisis in 2008.
The CFTC, which regulates over-the-counter swaps, had issued guidance banning a clearinghouse operator from requiring customers to use its captive swap data repository.
CME sued to block those rules on November 8, saying they contradicted other rules written under the Dodd-Frank financial reform law. The law requires standard swaps to be traded on regulated platforms and routed through clearinghouses, which stand between parties to guarantee their trades.
On Wednesday, the CFTC withdrew its ban and said it would seek public comment on a CME rule that would require traders clearing swaps at CME's clearinghouse to report data on those swaps to CME's own swap data repository.
CME withdrew its complaint from U.S. court on Thursday "without prejudice," meaning it could refile the lawsuit in the future, a spokeswoman told Reuters.
The Depository Trust and Clearing Corp, which operates a rival swap data repository, blasted the CFTC's reversal, which could allow CME to keep its customers' swaps data to itself.
"The Commission's action late yesterday was an unexplained and an abrupt reversal of course," the DTCC said in a statement on Thursday.
"This action is inconsistent with the Commission's previous actions, and will cause market participants to question the finality of any Commission rule or interpretation."
CME's complaint against the CFTC was the third challenge to the regulator in its history.
The case is Chicago Mercantile Exchange Inc. v. U.S. Commodity Futures Trading Commission, U.S. District Court for the District of Columbia, No. 12-cv-1820.
(Reporting By Ann Saphir; Writing by Tom Polansek; Editing by Gary Hill and David Gregorio)