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31 January 2014

Bloomberg: ICAP seeks CFTC oversight of London swap-trading amid US suit


ICAP is seeking US oversight of an overseas swap-trading platform a month after Wall Street lobbying groups sued the CFTC trying to curb the agency's international reach.

ICAP, the world’s largest broker of transactions between banks, wants to register a London-based platform with the CFTC to follow Dodd-Frank Act rules for swap-execution facilities and provide access to US traders, according to an applicationsubmitted this month. The brokerage is the first large Sef platform to seek US approval for an overseas-based entity. “In the event of market demand to facilitate Sef liquidity across Europeand the European markets, ICAP Derivatives Limited should allow us to operate one liquidity pool leveraging both our US and London capabilities", Peter Best, chief operating officer of ICAP’s Sef, said in an e-mail. The platform will support trading in interest rate swaps in US dollars, euros and pounds sterling, Best said.

The question of how to apply the Dodd-Frank rules overseas has been among the most contentious battles between the financial industry and the CFTC, whose power to regulate swaps was expanded by the 2010 law. Largely unregulated deals helped fuel the 2008 credit crisis and led to the US rescue of American International Group Inc., the New York-based insurer that traded credit default swaps out of its London offices.

The biggest banks conduct at least half their swaps business with overseas clients, according to some estimates. Groups representing companies including Goldman Sachs Group Inc and JPMorgan Chase & Co., sued the CFTC in federal court, seeking to curb its reach.

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