On June 7, 2013, a federal district court dismissed a lawsuit brought by Bloomberg L.P. (“Bloomberg”) against the Commodity Futures Trading Commission (“CFTC”) challenging the recent adoption of CFTC Rule 39.13(g)(2)(ii) (the “Rule”), which establishes minimum initial margin requirements to be assessed by derivatives clearing organizations (“DCOs”) on customers. The court ruled that Bloomberg lacked standing because it had failed to demonstrate an actual or imminent injury-in-fact caused by the Rule that the court could redress. The court also stated that Bloomberg, apart from its lack of standing, could not satisfy the “high standard for irreparable injury” required for a preliminary injunction.
In its complaint, filed on April 16, 2013, Bloomberg claimed that the adoption of the Rule violated the Commodity Exchange Act and the Administrative Procedure Act because of the insufficient evaluation of its costs and benefits, failure to provide interested persons sufficient opportunity to participate in the rulemaking, and arbitrary and capricious agency action.
Bloomberg operates an electronic service that, among other things, facilitates the trading and processing of over-the-counter (“OTC”) swaps, and Bloomberg intends to operate a swap execution facility (“SEF”), a platform on which swaps can be listed and executed. The Rule requires DCOs to establish initial margin requirements for customers using a minimum “liquidation time” of one day for futures and five days for financial swaps. (Under the Dodd-Frank Act, a swap must be cleared by a DCO if the CFTC determines that the swap is required to be cleared, absent an exception.) “Liquidation time” is the estimated amount of time needed to offset a defaulted position in a product; the longer the liquidation time for a transaction, the more margin a clearing member must collect from its customer.