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Litigators Must Love the CFTC

| FinReg

By David B. Weiss, Aite Group

Originally published on Aite Blog 

The usual legal industry of lobbying, commenting, advising, etc. that the CFTC and SEC have created aside, it sure does seem like the CFTC is driving a fair amount of business for litigators these days:

First, the CME threatened to sue the CFTC over SDR rules, sued them, then dropped the suit last year after evidently getting what it wanted.

Then, the DTCC threatened to sue the CFTC for caving in to the CME and relaxing SDR rules.

Meanwhile, Bloomberg, already a little impatient with the CFTC being in its third year of issuing final SEF rules, finally had enough of (in its view) disparate margin treatment of similar financial products (swaps vs. swap futures) and sued the CFTC.

Just two hours after the CME downplayed Bloomberg’s lawsuit during its first-quarter earnings call, the DTCC finally pulled the trigger and did sue the CFTC.

Sure makes it interesting for the spectator. Of course, not all market operators have taken that route. Some have just asked to be let off the rules for a while. Bloomberg is noted far more for being “sticky” then litigious, but when it decided to step up to the plate, it did so in a big way, choosing Eugene Scalia (and former governor of New York, Mario Cuomo) to make its case. Scalia has a pretty good record when it comes to these regulatory lawsuits, so it was pretty bold of the CME to make light of Bloomberg’s lawsuit, given their own track record, detailed above, against the CFTC. How ironic that, hours later, the DTCC would sue the CFTC in direct response to the favor it believes was shown to the CME (and ICE) on SDRs.If the CFTC and SEC felt overwhelmed by their new regulatory tasks stemming from Dodd-Frank, then these latest two regulatory arbitrage opportunities created by the CFTC were not the right steps to take. Now they’re being sued on two fairly substantive grounds.