November 9, 2012 / 4:01 AM / in 5 years

CME Group sues to freeze CFTC swap reporting rules

NEW YORK (Reuters) - Exchange operator CME Group asked a U.S. court on Thursday to prevent the chief U.S. derivatives regulator from enforcing swap reporting rules passed after the 2008 financial crisis.

Thursday’s lawsuit, filed in federal court in Washington D.C., is the third industry challenge to the Commodity Futures Trading Commission (CFTC) in its history.

In the lawsuit, CME asks that a judge issue an injunction to prevent the CFTC from enforcing the rules against the exchange when they come into effect for it on November 13.

By adopting the rules without “the benefit of an adequate cost-benefit analysis,” CME said in the lawsuit, “the CFTC acted in a manner that was arbitrary and capricious and otherwise not in accordance with law”.

A CFTC spokesman declined to comment on the lawsuit.

CME, specifically, is challenging the requirement that exchanges make available non public reports of cleared swap transactions to new CFTC-registered entities called “swap data repositories” (SDRs) which would in turn make the swap data available to the CFTC.

“CME incurs substantial costs in terms of time, personnel, technological infrastructure, and money to maintain these data in the ordinary course of business,” the lawsuit said.

The new rules would only “impose costly, cumbersome, and duplicative requirements”.

CME said in the lawsuit that it had applied to register as an SDR, but that its request had not been granted.

The rules at issue are part of the Dodd-Frank Act, a reaction to the 2008 financial crisis. The act was in part designed to improve transparency in the $640 trillion over-the-counter derivatives market.

The law requires standard swaps to be traded on regulated platforms and routed through clearing houses, which stand in between parties to guarantee trades.

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 Basil Katz; Editing by Jeremy Laurence

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