By Douwe Miedema
WASHINGTON, June 8 The top U.S. derivatives
regulator won a legal victory over Bloomberg LP late on Friday,
when a court dismissed a case the data vendor had filed that
claimed a new rule on trading swaps would hurt its business.
Bloomberg is one of a dozen or so providers launching a
platform on which to trade swaps, as regulators across the world
crack down on the $630 trillion market to prevent a repeat of
the 2008 financial crisis.
But that effort would be hurt by a new rule from
the Commodity Futures Trading Commission which will force buyers
and sellers of swaps to set aside enough money - or margin - to
cope with the impact of a deal falling apart, Bloomberg had
That is because the margin on a swap should be enough to
cover five days of unwinding the position, but only one day for
futures, a similar type of product traded on rival exchanges,
making them cheaper to use.
The court said, however, that Bloomberg had provided no
evidence that this requirement would hurt its business.
"Bloomberg ... simply assume the worst-case scenario ...
without grounding their assumption in the actual behavior," it
said in its ruling.
On another point, it said that the "plaintiff's contentions
in this regard are remarkably perfunctory and devoid of factual
Bloomberg will continue to press forward with its legal
challenge, a spokesman said.
Commissioner Bart Chilton said in a statement that the CFTC
could focus on the task ahead of tightening regulations of
swaps now that "another attempt to second-guess regulators on
financial reform measures sought by Congress and President
(Barack) Obama" was behind it.
Underlying the lawsuit is a looming battle between exchanges
and investment banks over who rules the lucrative derivatives
market, a vast playground for speculators, parts of which were
Exchanges, which dominate the futures markets, have been
regulated for decades and now operate at a lower cost because of
the CFTC's rule.
The banks hold sway over the swaps market, and fear clients
will defect to the exchanges, hurting their revenues as well as
the trading platforms - called Swap Execution Facilities (SEF) -
Bloomberg and others want to launch.
Bloomberg is a competitor of Thomson Reuters Corp.
The case is Bloomberg LP v United States Commodity Futures
Trading Commission, U.S. District Court for the District of
Columbia, No. 13-52