The CFTC Is Drowning in Market Data

Swaps are private agreements that allow investors to either speculate or hedge their risks on interest rates, currencies, and default. In a credit-default swap, for example, the owner of a corporate bond can buy a swap that pays off should the issuer default. These agreements were often negotiated over the phone, with no requirement for either party to post collateral or report the trades publicly. The availability of swaps, which allowed banks to take big risks on bad mortgages in an overheated housing market, was a chief cause of the meltdown.

To keep that from happening again, the 2010 Dodd-Frank financial reform law sought to push swaps trading onto open exchanges, where prices and trading volume could be seen by everyone. That way the government could watch the swaps market in real time, tracking risk and looking for patterns of questionable transactions. After years of writing rules and push-back from the financial industry, the government registered 17 privately owned exchanges, known as swap execution facilities. (Bloomberg LP, the parent of Bloomberg Businessweek, operates one of them.)

Read More: www.businessweek.com/articles/2013-10-31/the-cftc-is-drowning-in-swaps-futures-trading-data#r=nav-fs