Mark Wetjen, a member of the Commodity Futures Trading Commission, says the agency should reject a suggestion from CME Group's Terry Duffy that the regulator block U.S. banks' access to Europe's futures markets in retaliation for delays in Europe recognizing U.S. clearinghouses. "I don't think that response would lead to the desired policy outcome, which is to limit market fragmentation and avoid arbitrage," Wetjen said.
The world's first stock exchange was born in Amsterdam in 1602, and while other financial centers have since displaced it, the Dutch city is renowned for its leadership in the newest form of deal making: high-frequency trading. Three of the four founding companies of a European trade body representing high-frequency traders are headquartered in Amsterdam.
The day before Dodd-Frank Act-mandated regulations enforcing the reporting of swap trades by firms that are neither swap dealers nor financial entities came into effect, the Commodity Futures Trading Commission granted companies several more months to prepare for the rules. "The CFTC gave people what they wanted, but it's unfortunate that they waited until the last minute," says Michael Prokop of The Alliance Risk Group. "It's a shame they couldn't have done that without driving everybody crazy and putting everyone's systems under stress."
The futures industry continues to evolve, and while regulators strive to keep pace, critics say they have fallen desperately behind, as evidenced by the collapse of MF Global Holdings and Peregrine Financial Group. "For an industry like the futures industry that has always been known as safe and sound as far as segregated [customer] funds go, maybe we have taken that too much for granted," said Jill Sommers, a member of the Commodity Futures Trading Commission. "Maybe it took those situations to show the rules are antiquated, how technology has to be integrated into policing the industry and how we can do these things more effectively and efficiently."
Industry experts say the lawsuit Bloomberg has filed against the Commodity Futures Trading Commission will not slow down the futurization of swaps. Bloomberg's lawsuit involves the differing margin requirements for swap futures and cleared swaps. "There is definitely going to be a significant shift from swaps to futures, but it will not be a complete migration of volume," said Charley Cooper of State Street Global Markets.