The Depository Trust & Clearing Corporation (DTCC) has filed a lawsuit against U.S. derivatives regulator Commodity Futures Trading Commission (CFTC) challenging rulings it has made regarding swaps data repositories (SDR).
Last month, the CFTC approved a pledge by CME Group to push through CME Rule 1001, which requires swaps cleared through CME to be reported exclusively to CME's own SDR, CME Repository Service. IntercontinentalExchange, in its role as a derivatives clearing organization (DCO) and operator of its own SDR called ICE Trade Vault, has backed the measure to allow DCOs to report to their own captive SDR.
DTCC claims the CFTC's ruling is anticompetitive, and swaps participants should be allowed to use the SDR of their choice. DTCC operates the third of three SDRs approved so far by the CFTC, DTCC Data Repository.
For its part, the DCOs are arguing that they can offer market participants lower costs by utilizing automatic SDR reporting, essentially bundling reporting with clearing.
SDRs were developed out of the Dodd-Frank Act to bring a level of transparency to the swaps market. Swaps trades in the U.S. now are required to be reported to an SDR, which compiles and disseminates the data to the market.
"The CME and ICE Rules are anticompetitive and undermine the core pro-competitive principles of the Dodd-Frank Act," Larry Thompson, general counsel for the DTCC, said today in a statement. "By approving these rules, CFTC changed its original adherence to the pro-competitive principles of Dodd-Frank and instead sanctioned anticompetitive behavior that allowed these clearing houses to require reporting of cleared swap data to their captive swap data repository (SDR)."
In its lawsuit, DTCC claims the CFTC gave in "under the threat of a CME lawsuit." In November, CME Group dropped a complaint against the CFTC after the regulator agreed to reconsider allowing DCOs to require traders to use a captive SDR. That led to the March decision to allow the activity.
"These rules jeopardize the underlying principles of Dodd-Frank, are inconsistent with the commission's own regulations and compromise the ability of regulators and market participants to understand, assess and manage systemic risk," Thompson said in his statement.
Spokespeople for CME and ICE both declined to comment.
Click here to view DTCC's complaint (PDF).