Energy Swaps Migrating to Futures as Dodd-Frank Rules Take Hold
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11. More than half of the $18 trillion in notional daily trading of energy swaps has moved to futures exchanges from the over-the-counter market in response to the U.S. regulatory overhaul aimed at increasing transparency following the 2008 financial crisis.
22. ICE said 52 percent of its energy futures volumes during the first half of January came from contracts that prior to Oct. 15 were traded as swaps. CME said about 90 percent of energy trades on its ClearPort system are executed as futures, compared with 10 percent before the switch.
33. Volumes have soared at the two largest U.S. futures exchanges as oil and gas companies seek to avoid higher costs that come from being designated a swaps dealer under the Dodd- Frank Act, which the Commodity Futures Trading Commission (CFTC) said is any firm that does more than $8 billion of the transactions annually. The shift also helps ICE and CME to maintain their dominant clearing businesses.
44. Interest-rate or credit swaps are less likely to follow the path of energy swaps into futures because it’s harder for banks and other financial firms to stay below the $8 billion threshold as recommended by Dodd-Frank Act.
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