CME Swap-Data Routing Plan Backed by CFTC Over Rivals’ Objection

CME Group Inc. won regulatory approval to have information about swaps routed to its own database over the objections of the Depository Trust and Clearing Corp. and banks including JPMorgan Chase & Co.

The Commodity Futures Trading Commission voted 4-0 to grant Chicago-based CME, owner of the world’s largest futures exchange, the authority. New York-based DTCC, operator of a rival database, has said it might sue the CFTC if the CME’s proposal was approved.

“For all swaps cleared by the clearing house, and resulting positions, the clearing house shall report creation and continuation data to CME’s swap data repository for purposes of complying with applicable CFTC rules governing the regulatory reporting of swaps,” the CFTC said yesterday in a statement.

Dodd-Frank, the 2010 regulatory overhaul, gave the CFTC and Securities and Exchange Commission authority to write rules requiring swap data to be reported to the agencies and the public. The law, enacted in response to the 2008 credit crisis, set up so-called swap data repositories as record-keepers for information about buyers and sellers, volume and prices.

“We are very pleased with the CFTC’s approval of our rule, which provides clarity on the issue and certainty for market participants,” Michael Shore, a CME Group spokesman, said in an e-mail. “We are eager to continue clearing swaps and reporting cleared swaps in the most efficient way.”

The DTCC has said the CME plan fails to comply with more than a year of CFTC rulemaking and would lead to worse oversight of the market because data will be fragmented.

‘Cripple’ Choice

The CME rule “will cripple market participant choice, is anti-competitive and compromises regulators and market participants’ ability to understand, assess and manage systemic risk effectively,” Larry Thompson, DTCC’s general counsel, said in an e-mailed statement. He said DTCC and other market participants are considering their possible responses.

JPMorgan in a Jan. 11 letter to the CFTC said the CME proposal is an anticompetitive arrangement between clearing and data record-keeping. The proposal also will hurt the Dodd-Frank Act goal of increasing swaps-market oversight, Alessandro Cocco, a JPMorgan managing director, said in the letter.

“CME’s proposed rule would spread swap data across numerous” databases, resulting in less transparency, he wrote.

Scott O’Malia, a Republican CFTC commissioner, abstained from the vote because he said the agency’s underlying regulations should be amended. “My preferred approach, an approach that was not presented to the commission as an option on which to vote, would have been to re-propose” the agency’s regulations, he said in a statement.