DTCC Drops Case against CFTC

The U.S. Depository Trust and Clearing Corporation ("DTCC") and the CFTC agreed to dismiss the remaining claims in the DTCC's lawsuit against the CFTC for its approval of rules permitting clearinghouses to steer swap trading data to the clearinghouse's affiliated swap data repository ("SDR").

Originally, the CFTC proposed the requirement that parties to a swap be able to select the SDR to which their data would be reported. This CFTC position, which was encapsulated in one of the CFTC's series of Frequently Asked Questions, was challenged in court by the CME Group Inc. ("CME"). In order to avoid that litigation, the CFTC withdrew the FAQs and allowed the CME to submit a rule proposal that would allow the CME to mandate a link between clearing and trade reporting. The CME then submitted proposed CME Rule 1001 to the CFTC which would require swaps cleared on the CME to be reported to the SDR maintained by the CME. ICE submitted a similar proposal that would require swaps cleared on ICE to be reported only to its SDR. The CFTC approved both rules.

In June 2013, the DTCC, which was setting up its own independent SDR, sued the CFTC, charging that the withdrawal of the FAQs violated the Administrative Procedure Act, and that its approval of the exchange rules was anti-competitive, undermined core principles of Dodd-Frank promoting competition, and benefited the DTCC's rivals who, unlike the DTCC, were clearinghouses with their own captive SDRs. In its court filing, the DTCC claimed that it invested "millions of dollars plus time and effort to create and register" a SDR, and that its investment was harmed by the CFTC decision. In March of this year, the federal judge overseeing the case dismissed three of the five counts in the DTCC lawsuit. The DTCC now has agreed to drop the other two claims in its lawsuit against the CFTC.

See: DTCC v. CFTC Joint Stipulation to Voluntary Dismissal. See also: Original DTCC v. CFTC Complaint.Related news: CFTC Staff Withdraws Elements of the FAQ on Reporting of Cleared Swaps; Seeks Public Comment on CME Rule 1001 (with Lofchie Comment) (November 28, 2012); Battle over Swaps Trade Reporting (with Lofchie Comment) (January 18, 2013).