The warehouse system unveiled by theDepository Trust & Clearing Corporation last week could reduce the incentive to move over-the-counter trading of credit default swaps onto an exchange in the future, according to flow traders. The move comes at a good time, they added, given The Chicago Mercantile Exchange is trying to cut into market share with plans to launch credit-event futures in the first quarter of next year.
Last week,The Chicago Board Options Exchange issued a challenge to the Merc, claiming the products are options and fall outside the jurisdiction of the U.S. futures regulator. The claim comes in a letter sent last week to the Commodity Futures Trading Commission, which regulates futures. The Merc has said in a filing that the products have been "carefully constructed" to avoid classification as a security future, which would be subject to dual regulation by the CFTC and the Secrities and Exchange Commission. Calls to the CME were not returned by press time.
