The Commodity Futures Trading Commission (CFTC) has approved a rule in CME Group’s rulebook that compels market participants to report the trades cleared through the US derivatives bourse to its data repository.
The CME’s Rule 1001 has been the subject of much contention, with the Depository Trust and Clearing Corporation (DTCC), which offers a swaps reporting service, but not OTC derivatives clearing, criticising the CFTC late last year after the agency reversed its position on the subject.
The DTCC has again blasted the CFTC’s decision, believing it is inconsistent with the principles of the Dodd-Frank Act – US legislation that encompasses OTC derivatives reform.
The legislation will require swaps to be traded on exchange-like venues known as swap execution facilities in the US, in addition to mandating trading and clearing of swaps where possible.
“Rule 1001 will cripple market participant choice, is anti-competitive and compromises regulators and market participants’ ability to understand, assess and manage systemic risk effectively,” said DTCC general counsel Larry Thompson in a statement. “DTCC is engaging with the broad cross-section of market participants who oppose Rule 1001 to determine next steps to protect market participants’ choice for where to report their swaps transactions.
The US futures regulator had indicated that entities offering clearing and data repositories services for OTC derivatives would not be able to link the two services together but changed its mind late last year.
The latest approved CME rule requires all swaps cleared by the exchange’s clearing house to be reported to the CME swap data repository (SDR). Counterparties to a swap transaction can ask CME to share their data with other SDRs.
Much of the swaps trades reported to DTCC have hitherto been interest rate swaps or credit derivatives trades, given that reporting of these instruments started on 12 October.
The firm announced earlier this week that its SDR is now seeing increased reporting across all five major asset classes from major dealers after the commencement of reporting in equity, FX and commodity derivatives on 28 February. All other market participants will have to start reporting trades in these asset classes on 12 April.