Eugene Scalia, a partner at Gibson, Dunn & Crutcher, submitted a letter on behalf of Bloomberg to the CFTC, threatening to sue the regulator if the agency does not ease proposed margin requirements for over-the-counter derivatives.
Scalia has won two cases against financial regulators over their implementation of the controversial Dodd-Frank Act. The CFTC proposal seeks to require customers who enter into interest rate and credit default swaps to provide enough margin to cover a five-day default period, IFR Asia reports.
Futures, however, only require customers to post enough margin for a one-day default window.
“This differential treatment is inconsistent with Dodd-Frank Act’s commitment to transparency, investor protection and competition, and it poses imminent, significant adverse consequences for Bloomberg [and potentially others],” Scalia said, according to IFR Asia. “Bloomberg respectfully submits that [the rule] is seriously flawed and threatens significant adverse effects for Bloomberg, other SEFs, participants in the swaps and futures markets and investors and taxpayers generally.”
The letter requested that the CFTC “promptly take all steps necessary” to issue a stop to the five-day minimum requirements in favor of a one-day requirement.
Scalia previously won a case on behalf of the International Swaps and Derivatives Association and Securities Industry and Financial Markets Association that sought to put down a rule proposed by the CFTC that would impose position limits on speculative commodities, IFR Asia reports.
Additionally, Scalia won another case against the SEC, which had attempted to force corporations to provide company stockholders with access to proxy materials on board nominees.