Bloomberg News

CFTC Enlists Treasury Support for Review of Swap-Data Oversight

March 31, 2014

The U.S. Commodity Futures Trading Commission, which for more than a year has cited an inability to fully understand swaps-market data, has enlisted the help of a Treasury Department unit to improve oversight.

The CFTC and Treasury’s Office of Financial Research are beginning a review of price and volume information collected by databases operated by the Depository Trust & Clearing Corp., CME Group (CME:US) Inc. and others, according to a statement today. The review is aimed at coordinating data that has been reported in different ways to regulators since the beginning of last year.

“Today’s agreement with OFR will enhance the CFTC’s ability to see and analyze the data” by providing staff and resources, Acting CFTC Chairman Mark P. Wetjen said in the statement. Wetjen’s agency, the top U.S. swaps regulator, has complained that it has insufficient funds to handle oversight responsibilities broadened by the Dodd-Frank Act.

The CFTC and Securities and Exchange Commission were required by the 2010 regulatory overhaul to create rules for the databases to ensure authorities can spot risks in the financial system. Regulators lacked complete understanding of how interconnected banks had become through the swaps market before the collapse of Lehman Brothers Holdings Inc. during the 2008 credit crisis.

The data regulations have been a challenge at CFTC, which is defending against a lawsuit brought by New York-based DTCC over how trade information can be reported. DTCC said Chicago-based CME’s approval to have information about swaps reported to its own database is anticompetitive and reduces transparency, and accused the CFTC of unfairly favoring CME.

The CFTC on March 19 solicited comment on about 70 questions on ways to improve data collected by the repositories. The agency could later propose policy changes.

London Whale

Scott O’Malia, a Republican CFTC commissioner, raised questions last year about the adequacy of the data rules. The data was failing to give regulators a full picture of the swaps market and wouldn’t help them detect a loss similar to JPMorgan Chase (JPM:US) & Co.’s London Whale trades, he said in March 2013.

“This is a great first step,” O’Malia said in a telephone interview. “We admit we have a problem. We are now moving toward a solution.” O’Malia said U.S. and international regulators also need to coordinate data standards to ensure authorities can oversee and share oversight of the market.

Data repositories operated by IntercontinentalExchange Group Inc. and Bloomberg LP, the parent company of Bloomberg News, have also registered with the CFTC.

To contact the reporter on this story: Silla Brush in Washington at sbrush@bloomberg.net

To contact the editors responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net Gregory Mott


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Companies Mentioned

  • CME
    (CME Group Inc/IL)
    • $82.82 USD
    • 2.13
    • 2.57%
  • JPM
    (JPMorgan Chase & Co)
    • $61.04 USD
    • 0.73
    • 1.2%
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