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The Depository Trust & Clearing Corporation (DTCC) today announced that it has filed a comment letter with the U.S. Commodity Futures Trading Commission (CFTC) expressing concern over the lack of clarity as part of an overall arbitrary and inconsistent rulemaking process to determine the regulatory reporting structure for over-the-counter (OTC) derivatives transactions. The DTCC letter, filed late yesterday, detailed the most recent in a series of CFTC missteps that have raised serious questions about decision-making at the agency. DTCC has been a strong proponent of the transparency goals outlined in the Dodd-Frank Act (DFA) and has worked closely with market participants to implement these goals.
In its letter, DTCC urged the Commission to address inconsistencies regarding the conclusion of its recent swaps data reporting public comment period, as well as to publicly address how it plans to consider third party comments and questions raised about the impact of The Chicago Mercantile Exchange Inc. (CME) proposed Rule 1001. DTCC also asked the Commission to extend the review period by an additional 45 days in order to appropriately analyze the novel and complex issues associated with Rule 1001.
A diverse group of stakeholders including a wide spectrum of trade associations and market participants have all expressed serious concern with the proposed change. This group includes associations for corporate end-users representing the great bulk of domestic energy production and natural gas supply, traditional investment managers representing a significant portion of retirement savings and pension funds for U.S. workers, and multiple financial services trade groups. Stakeholders opposing or expressing concern about the proposed rule include Edison Electric Institute (EEI), Electric Power Supply Association (EPSA), Large Public Power Council (LPPC), National Rural Electric Cooperative Association (NRECA), Natural Gas Association (NGSA), International Energy Credit Association (IECA), Association of Institutional INVESTORS (AII), GFMA FX Division, International Swaps and Derivatives Association (ISDA), Securities Industry and Financial Markets Association (SIFMA), Wholesale Markets Brokers' Association, Americas (WMBA), Moore Capital Management, LP., Citigroup Inc., Deutsche Bank and JPMorgan Chase & Co.
In addition to the comment letter, DTCC also submitted a report by the leading economic consulting firm, NERA, which outlines guidance for the Commission as it considers the anti-competitive and cost-benefit ramifications of Rule 1001.
DTCC has raised a series of objections to CFTC action regarding the swaps data rulemaking process and the impact of proposed Rule 1001, including a January 8, 2013 comment letter in which DTCC highlighted the ways in which Rule 1001 would undermine the intent of Dodd-Frank, decrease transparency for investors and regulators, and increase risk to global financial markets.
CME proposed Rule 1001 would allow inappropriate commercial bundling of swap data repository (SDR) and clearing services by CME (and other DCOs), and eliminate the ability of market participants to choose their preferred SDR. The proposed CME rule would require, as a condition for using CME clearing services, that all CME customers have their cleared trades directed to CME’s own captive SDR. This would undermine the intent of Dodd-Frank’s provisions on fair and open access, market protection, trading transparency, risk mitigation and anti-competitive practices.
For additional information, please see DTCC January 14 Comment Letter.
To view previous DTCC comment letters and third party letters, please see Comments for Industry Filing on the CFTC website.
DTCC provides critical infrastructure to serve all participants in the financial industry, including investors, commercial end-users, broker-dealers, banks, insurance carriers, and mutual funds. DTCC operates as a cooperative that is owned collectively by its users and governed by a diverse Board of Directors. DTCC’s governance structure includes 344 user shareholders.
