CME Files Lawsuit Against the Commodities Futures Trading Commission

On November 8th, U.S. exchange operator CME Group filed a lawsuit against the Commodities Futures Trading Commission (CFTC) in the United States District Court for the District of Columbia, asking for an injunction to prevent the CFTC from requiring CME Group to report private data to a third party. In the lawsuit, CME Group alleged that the regulator overstepped its authority under the Dodd-Frank Act by requiring CME Group to report non-public swaps transactions data to CFTC-certified Swap Data Repositories (SDRs), which is in turn released to federal regulators to be used to monitor the market. 

CME Group said in the lawsuit that the collection and maintenance of the swaps data is costly for the organization, and that the new rules would only “impose costly, cumbersome, and duplicative requirements.” The rule adds to current frustrations resulting from the fact that CME Group applied to register as an SDR—which is currently a requirement under the Dodd-Frank Act, and facilitates reporting and recordkeeping—but its request has not been granted by the CFTC.

The Dodd-Frank Act was drafted in response to the 2008 financial crisis, and it was designed to improve transparency of the over-the-counter derivatives market. It requires standard swaps to be traded on regulated exchanges, and to go through clearing houses. However, there have been a series of lawsuits by financial entities to weaken regulatory reforms, including one lawsuit filed by Wall Street traders last September in the U.S. District Court for the District of Columbia, challenging the CFTC’s rule of placing position limits on the number of contracts the traders can hold in commodities, including oil, coffee, and gold. The court rejected CFTC’s rule, reasoning that CFTC failed to sufficiently prove that the position limit requirement was necessary to curb speculations in commodities market.

The lawsuit was a major victory for Wall Street, but it is questionable whether the outcome of CME’s lawsuit will face the same fate, as there seems to be lack of industry-wide support for CME’s effort to set up its own SDR. However, there is no doubt that this is part of the barrage of lawsuits from financial industry groups seeking to delay new regulations stemming from Dodd-Frank.