Bloomberg testified before the U.S. Senate Banking Subcommittee on Securities, Insurance and Investment regarding regulations on over-the-counter (OTC) derivatives on June 29th.

As the largest independent trading platform for OTC derivatives, we provided perspectives on provisions of the Dodd-Frank Wall Street Reform & Consumer Protection Act, which requires companies to trade credit-default swaps (CDS) and other derivatives products through regulated exchanges called swap execution facilities — or SEFs.  Given our unique position in the marketplace as a wholly independent player, the Senate Banking Committee asked us to comment on how SEFs should be regulated.

In short, we support the mandatory clearing and post-trading reporting requirements, but have concerns about the way the regulations will be promulgated, as poorly constructed rules have the potential to inhibit market trading flexibility and raise costs for the end user — which would not fully achieve the important goals set out by the Dodd-Frank legislation.

As with all new regulations, the devil is in the details. As stated in our testimony before the Senate, sophisticated market participants do not really need or want federal regulators micromanaging execution protocols. 

Bloomberg intends to register as a SEF and we are actively engaged with regulators in the rule making process.  Our customer base is evenly distributed amongst buy side and the sell side participants, so we are an independent company not beholden to anyone, nor are we biased toward any particular element of the market.  As an empirically-driven and data-centered member of the financial services community, our goal is to bring transparency and efficiency to the marketplace — including in the highly complex derivatives market.

To read the Bloomberg testimony, click here, or if you prefer to watch the full Senate hearing, you can do so here.

 

Ben Macdonald is Bloomberg’s Global Head of Fixed Income