CME Group dropped its lawsuit challenging Dodd-Franks swap data repository (SDR) rules Thursday, one day after the Commodity Futures Trading Commission (CFTC) withdrew certain SDR policies in order to review its rulemaking around previously written swaps reporting requirements.
CME withdrew the following questions from its Frequently Asked Questions on Reporting of Cleared Swaps:
– Which party has the authority to select the particular SDR for purposes of cleared swap reporting?
– May a DCM, SEF or DCO that is also registered as an SDR or legally affiliated with an SDR require counterparties to use their captive SDR for reporting swap transactions?
– Where must the resulting swaps created through the clearing process be reported?
As the rules are currently written, it is interpreted that swap counterparties may use the SDR of their choice. CME, however, wants all swaps cleared by its CME Clearing House to be reported automatically to its own swap data repository, which was approved by the commission on November 22. CME says it can offer market participants lower costs by utilizing automatic SDR reporting, essentially bundling reporting into its clearing services.
CFTC staff are currently reviewing their previously written SDR policies, while the CMEs proposal has been put out by the commission for public comment.
The Depository Trust & Clearing Corporation (DTCC), whose own SDR was approved by the CFTC in September, lambasted the CME and CFTC for backtracking on the rules.
The industry has spent hundreds of millions of dollars to be fully prepared to meet reporting obligations that will become effective in one month, DTCC said today in a statement. The commission’s action late [Wednesday] was an unexplained and an abrupt reversal of course. This action is inconsistent with the commissions previous actions, and will cause market participants to question the finality of any commission rule or interpretation. This will ultimately disrupt the progress the industry and regulators have achieved so far to implement the financial reforms mandated by the Dodd-Frank Act.
Major swap dealers will be required to register with the CFTC and begin reporting to SDRs by December 31.
(CG)