Wall Street Wins Rollback in Dodd-Frank Swap-Trading Rules

Some see vote as the start of a seismic shift in trading of OTC derivatives.

JPMorgan Chase & Co., Goldman Sachs Group Inc., and the world’s largest banks won rollbacks in final Dodd-Frank Act rules that promise to transform the private swaps market by increasing competition.

The Commodity Futures Trading Commission voted 4-1 in Washington last week on rules determining how buyers and sellers must trade credit-default, interest-rate, and commodity swaps in a $633 trillion global market. The rule weakened a proposal by reducing the number of price quotes buyers must seek on swap-execution facilities, after banks and asset managers said a five- quote requirement was onerous and would impair trading.

New Platform

The rules represent the final definition of a new type of trading platform set up under Dodd-Frank that is intended to serve as an alternative to exchanges operated by CME Group Inc. and Atlanta-based Intercontinental Exchange Inc. Bloomberg LP, the parent company of Bloomberg News, has filed a lawsuit challenging a separate CFTC rule that the company said will harm its planned swap-execution facility. Tradeweb LLC, Icap Plc, and GFI Group Inc. have said they plan to set up so-called SEFs.

Dealers ‘Win’

“It is going to be perceived as a win for the dealers, especially the two included in the RFQ,” Sunil Hirani, chief executive officer of the trueEX Group LLC swap-trading platform, said in a telephone interview. “I see it as a capitulation for those who wanted a higher number.”

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