The U.S. Commodity Futures Trading Commission is considering setting the reporting delay for traders to reveal prices for block trades of standardized swaps available on exchanges or so-called swap execution facilities.
CFTC commissioners are scheduled to meet in Washington today to vote on final rules for “real-time” reporting of such trades, one of a number of provisions of the Dodd-Frank Act designed to make the $708 trillion global over-the-counter derivatives market more transparent.
Dodd-Frank required the CFTC and the Securities and Exchange Commission to establish regulations to reduce risk in the derivatives markets, where largely unregulated trades helped fuel the 2008 credit crisis. The commission voted 3-2 on Nov. 19, 2010 to propose a 15-minute delay for reporting the block trades of standardized swaps, meant as a window to give traders a chance to hedge the big trades prior to them going public.
Banks, through industry groups, argued that the proposal for a 15-minute limit wasn’t enough time to protect them from competitors taking advantage of their need to hedge. Banks use hedging, which involves offsetting trades with opposite transactions, to shield themselves from losses.
“Dealers may hold on to positions for days or weeks before hedging,” the Federal Reserve Bank of New York said in a Sept. 27 report that cited anecdotal evidence of industry practices that could complicate regulators’ attempts to set the reporting window to a matter of minutes.
Bloomberg LP, the parent company of Bloomberg News, has said it intends to register as a swap-execution facility.
To contact the reporter on this story: Jesse Hamilton in Washington at jhamilton33@bloomberg.net.
To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net.