Submitted by EconomicPolicyJournal.com
It looks like Eric Holder's dogs at the Department of Justice are doing the CME Group a favor by investigating their largest derivatives swaps competitor, LCH.Clearnet, under Federal antitrust provisions. But are they also going after the large banks, and JP Morgan in particular, in roundabout fashion? And just where does the omnipresent MF global connection fit in? From Reuters today:
LCH.Clearnet, the largest clearinghouse in the $400 trillion interest rate derivatives market and also a credit derivatives clearing service, is owned by its members including banks such as JPMorgan Chase, Goldman Sachs and Deutsche Bank. A spokeswoman for the firm declined to comment.
The Justice Department is concerned that a small group of the world's largest banks can use their ownership and influence over key market infrastructure including clearinghouses, trading platforms and data services to impede competition.
Justice Department spokeswoman Alisa Finelli declined to comment on specific details of the probe, or the firms involved. But she did outline three areas the DOJ is focused on.
"The Antitrust Division is investigating the possibility of anticompetitive practices in the credit derivatives clearing, trading and information services industries," she said.
The Role of LCH.Clearnet
As followers of the MF Global saga may recall, it was LCH (among others) who delivered crushing margin calls on MF Global during its final week, $211 million of which in cash and securities was ponied up to LCH alone. However, it was the final $310 million call that sent its UK affiliate into Special Administration (similar to US bankruptcy), since it was also on the hook for collateral calls on these trades. From Trustee Giddens' June 6, 2012 report:
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