CME Derivatives Attract CFTC Review

Interest-rate swap future contracts wouldn't be included in Dodd-Frank swap count.

CME Group Inc.’s decision to allow users of its interest-rate swap future contracts to avoid tougher oversight is drawing scrutiny from its government regulator.

The contracts, which begin as futures and are converted to swaps guaranteed by CME’s clearinghouse if held until delivery, won’t be included in totals determining whether users face higher collateral, capital and trading requirements, Laurie Bischel, a CME spokeswoman, said. Under Commodity Futures Trading Commission rules, traders who buy or sell more than $8 billion of swaps in a year will face the tougher standards by being designated a dealer or so-called major-swaps participant.

Goldman Revenue

Darrell Duffie, a finance professor at Stanford University, said the CME contracts should count toward identifying large users if they convert to swaps upon delivery. While the shift to futures from swaps is a normal progression, “if the delivery-does-not-count rule is not changed, I would add this to the negative column on futurization,” Duffie said.

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