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CME Challenging CFTC Enforcement of Dodd-Frank

November 12, 2012
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The Chicago Mercantile Exchange (CME) has filed a lawsuit in federal court in Washington, DC, against the Commodity Futures Trading Commission, challenging the agency's enforcement of its swap data record-keeping and reporting requirements under the Dodd-Frank Wall Street Reform Act.

The CME asked the U.S. District Court for the District of Columbia to permanently enjoin the CFTC from enforcing the record-keeping/reporting requirements, arguing that the rules "would impose costly, cumbersome and duplicative requirements" on derivatives clearing organizations. The requirements are due to take effect Tuesday (Nov. 13).

Moreover, the exchange told the court that the cleared swap regulatory reporting rules "contravene the plain text of the CEA [Commodity Exchange Act] and are in any event not based upon a reasonable interpretation of the [act]." It urged the court to "hold unlawful and set aside the cleared swap regulatory rules."

The CFTC proposed the cleared swap regulatory reporting rules in December 2010. The rules would require derivative clearing organizations to make nonpublic reports of transaction data related to cleared swaps to a swap data repository (SDR) and would require SDRs to provide that information to the CFTC upon request.

This marks the third Dodd-Frank lawsuit filed against the CFTC challenging its Dodd-Frank regulations. In late September, the same court in Washington tossed out the Commission's controversial final rule aimed at limiting speculative trading in the swaps market (see NGI, Oct. 1). District Judge Robert Wilkins vacated the position limit rule and remanded it to the CFTC for further proceeding.

The International Swaps and Derivatives Association and the Securities Industry and Financial Markets Association challenged the rule in court in December, arguing that the agency adopted it without first determining that there was excessive speculation in commodity and swaps markets and failed to conduct a meaningful cost-benefit analysis of the rule (see NGI, Dec. 12, 2011).

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