D.E. Shaw, Pimco Say Cost, Legal Questions Slow Swaps Clearing

D.E. Shaw Group and Pacific Investment Management Co. said they are limiting their use of clearinghouses for swaps trades because of high costs and a lack of regulatory and legal clarity.

“There’s much less certainty about the amount of capital we commit” to clearinghouses versus cash that backs private over-the-counter transactions, Ted MacDonald, managing director at D.E. Shaw, said at the annual conference of the International Swaps & Derivatives Association in San Francisco. Clearinghouses can increase margin payments with little notice and “that’s a very real economic cost to us.”