The Facts about CFTC CME Clearing Rule 1001

CFTC imposed a reporting obligation on the CME Clearing (and all other DCOs) to report cleared swap data to an SDR. CME Group applied for and became a registered SDR. CME clearing will meet its compliance obligation by reporting its cleared swap data to CME Repository Service. CFTC had said CME Clearing (and other DCOs) could adopt a rule for this reporting. That is why CME Group filed Rule 1001. It has now been approved by the CFTC. Here are some of the facts:

  • CME Rule 1001 acknowledges the fact that the original bilateral swap transaction extinguishes during the clearing process and two new resulting swap transactions replace them whereby each party now faces the Clearing House. DCOs have an obligation to report these new post-clearing swaps. CME Rule 1001 simply explains how CME Clearing will discharge these reporting obligations.
  • CME Rule 1001 would not increase systemic risk. Copying data from CME Clearing into CME's SDR, as Rule 1001 contemplates, does not create any risk, let alone systemic risk.
  • CME Rule 1001 clearly meets the standard for approval under the Commodity Exchange Act and CFTC Rules. Under Rule 1001, CME Clearing simply chooses to report its cleared swap data to CME's SDR. As the CFTC stated, "the rules and regulations of a particular SEF, DCM or DCO may provide for the reporting to a particular SDR."
  • Market participants are free to report data immediately after execution of an original bilateral swap to the SDR of their choosing, subject to the CFTC's rules. CME Rule 1001 does not restrict or otherwise impact this process in any way. Also, under the Rule, trade parties facing CME Clearing can request to have CME provide the service of sending a copy of the same cleared swap data reported to CME's SDR to an alternate SDR.
  • CME Rule 1001 is consistent with the CEA's anticompetitive provisions and other U.S. antitrust laws. DTCC's antitrust claim is based on a far-fetched allegation that Rule 1001 would result in a "tying" arrangement in violation of the antitrust provisions of the CEA and other antitrust laws. Rule 1001 creates no tying arrangement and raises no other antitrust concerns.

For more information, please contact Jonathan Thursby at +1 312 454 8974 or Tim Elliott at +1 312 466 7478.