WASHINGTON, Jan 18 (Reuters) - The top U.S. derivatives regulator gave itself 45 more days to decide in a row between two rival financial groups fighting over potentially lucrative swaps reporting data.
The Commodity Futures Trading Commission (CFTC) said it needed more time to consider “novel or complex issues” that have come up as a result of new rules it has drawn up to enforce the Dodd-Frank law that tightened financial regulations after the financial crisis.
The fight, which has pitted Wall Street against Chicago’s powerful commodity traders, is about swaps trading data that will need to be made available to regulators - and partially also to the wider public.
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.
The Depository Trust & Clearing Corporation (DTCC), which performs back-office functions for banks, is blaming rival CME Group for sending all client trading data to its data warehouse, or Swap Data Repository (SDR).
Clients should have the choice where their data go, DTCC says, and the plan of the CME - which operates the world’s largest futures exchange - contravenes the gist of the new legislation, and risks fragmenting the data.
The conflict heated up two days ago, when the DTCC threatened to sue the CFTC if it vetted the CME’s plan, laid down as rule 1001 in the CME’s rule book.
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’s SDR or the DTCC.
Outsiders say the conflict is about who will be the dominant swaps data warehouse and generate more revenue, making the data more valuable and in turn lure more clients.
Under new global rules, swaps will need to be traded on exchange-like platforms, with central clearing houses standing in between buyers and sellers to reduce risk.
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 such dominant position in either of these two huge products, but could still build up substantial market share in new areas that will need to be cleared in the future because of the tighter rules.
Unlike the CME or ICE, DTCC does not offer clearing services. Instead it is relying on LCH.Clearnet to receive sufficient data in its SDR.