Bloomberg L.P. v. CFTC

Bloomberg L.P. (plaintiff) operated an electronic subscription service that facilitated the trading of swaps over the counter. Bloomberg’s revenue model was based on a monthly subscription fee, which was not tied to the trading volume of its customers. After enactment of the Dodd-Frank Act, the Commodity Futures Trading Commission (CFTC) (defendant) was tasked with regulating the trading of swaps. Dodd-Frank required that all cleared swaps be traded on a designated contract market or a new entity known as a swap-execution facility. Bloomberg intended to develop a swap-execution facility. In the meantime, though, the CFTC’s rules relating to swap-execution facilities were still being phased in, and therefore, swaps were still being traded over the counter. The CFTC promulgated a rule relating to margin requirements set by derivatives-clearing organizations (DCOs). The rule required DCOs to utilize a five-day minimum liquidation time in calculating the margin requirements for the trading of financial swaps, but it only required a one-day minimum liquidation time for calculating the margin requirements for financial-swap futures. In Bloomberg’s view, this would result in the futurization of swaps, meaning that futures products would be designed to mimic the characteristics of swaps. Bloomberg’s theory was that DCOs would set lower margin thresholds for financial-swap futures, making entities less likely to trade financial swaps, thereby making them less likely to subscribe to Bloomberg’s services. Bloomberg filed a lawsuit in federal district court to challenge the rule.