Exclusives: Market operators hinder CFTC as it seeks to monitor swaps - sources

Tue Mar 25, 2014 6:10pm EDT
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By Douwe Miedema

WASHINGTON (Reuters) - Market operators' failure to cooperate to provide the Commodity Futures Trading Commission with adequate data is preventing the regulator from effectively monitoring the global swaps market, according to sources familiar with the matter.

They said it means the CFTC, which is the derivatives market regulator, has yet to meet a major goal it was set after the credit crisis: to get on top of what is happening in the opaque $690 trillion market so that it can be confident of preventing another blowup.

Four people involved in talks between the CFTC and the industry say that bickering between participants is the reason that the agency still does not get the quality of data it needs, something it has been complaining about ever since buyers and sellers were required to report trades more than a year ago.

The CFTC intends to use the data to get a grasp on which banks and funds may be taking on too much risk through swaps, used to hedge and speculate on most financial markets.

"The data is still not working," said a person involved in talks between the market parties and the regulator. "Nobody is covering themselves in glory on this one. Everyone is being pretty difficult to deal with."

The problems reflect how companies and the authorities are struggling to create from scratch the infrastructure needed for effective regulation of the massive market.

Unlike stocks and futures that have been regulated for decades, the swaps market had grown up without such oversight.

As a result of the new rules, the three main data providers are required to share certain data so that the CFTC can monitor the overall market, as well as individual positions. But they are not always willing to do so because of commercial interests, the people said.   Continued...

Mark Wetjen, acting chairman of the Commodity Futures Trading Commission, testifies to the House Financial Services Committee about the effects of the Volcker Rule on employment in Washington on February 5, 2014. REUTERS/Joshua Roberts