Bloomberg L.P. filed a lawsuit on Tuesday against the top U.S. derivatives regulator to fight a new rule that would make the trading of swaps more expensive and hurt its business.
Douwe Miedema of Reuters writes, “Bloomberg is one of a dozen or so providers that plan to launch platforms on which to trade swaps, as regulators globally crack down on the $650 trillion market to prevent a repeat of the 2008 financial crisis.
“Under a rule by the Commodity Futures Trading Commission (CFTC), buyers and sellers of swaps must set aside enough money- so-called margin – to cope with the impact of a deal falling apart, assuming it takes five days to unwind the position.
“But for futures, a rival type of product, the assumption is that deals can be unwound in one day, making them far cheaper to use.
“‘These arbitrary requirements are the result of a flawed rule-making process and a patently deficient cost-benefit analysis,’ said Eugene Scalia, Bloomberg’s high-profile lawyer. ‘The rule will have a serious adverse effect on the market.’
“The CFTC declined to comment on the lawsuit, filed in federal court in Washington, D.C.”
Read more here. The question is whether Bloomberg News can now objectively cover the regulator with this conflict of interest. It was argued by some that Bloomberg’s coverage of the Federal Reserve was tainted when it filed a lawsuit seeking to disclose what banks had been lent money during the economic crisis of 2008.
