CFTC Boosts Scrutiny of Swap-Data Rules to Help It Spot Whales

The U.S. Commodity Futures Trading Commission is moving to revamp oversight of swap-market data after a member said the agency’s information wouldn’t help detect a loss like JPMorgan Chase & Co.’s London Whale trades.

Public comment is being sought on ways to improve the CFTC’s access to price, volume and other information held in new databases, the agency said in a statement today. The databases, run by companies including CME Group Inc. and the Depository Trust and Clearing Corp., are a Dodd-Frank Act requirement meant to help regulators see financial-system risks.

“For the commission to enforce the significant Dodd-Frank reforms, the agency must have accurate data and a clear picture of activity in the marketplace,” Democrat Mark P. Wetjen, the CFTC’s acting chairman, said in the statement. The agency set up a new internal working group to review its access to data.

The CFTC has been struggling to oversee data on the $693 trillion market since measures prompted by the 2010 regulatory overhaul went into effect more than a year ago. The Dodd-Frank swaps rules were a response to largely unregulated trades that helped fuel the worst financial crisis since the Great Depression.

Global regulators said last week that lenders are failing to produce sufficient data on financial products, including derivatives. About a third of 19 large banks in a survey that included Deutsche Bank AG, Barclays Plc and Goldman Sachs Group Inc. failed to produce trading reports that met regulatory standards, according to a report from regulators from countries including the U.S., Switzerland and Japan.

Missing Whale

CFTC Commissioner Scott O’Malia, a Republican, said in March that data the agency had been getting was inadequate to identify large positions and was overwhelming computer systems.

“The problem is so bad that staff have indicated that they currently cannot find the London Whale in the current data files,” O’Malia said at the time, referring to the derivatives trades that led to more than $6 billion in losses at JPMorgan.

The CFTC has been working to improve its oversight and access to the swap databases. As recently as Dec. 4, O’Malia said the agency was still receiving duplicative data on the market that required “extensive cleaning” and modifications.

“Just repeating ‘transparency, transparency, transparency,’ as a meaningless mantra won’t cut it, we have to actually have the correct, concise and useful processes in place and functioning for these reform efforts to have teeth,” Commisioner Bart Chilton, a Democrat, said today in a statement.

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