Swaps vs futures: OTC market speaks out

Swap futures have been pitched as economically equivalent to over-the-counter swaps, but with a much lighter regulatory burden. But some over-the-counter participants claim the rules create an unfair and unjustified arbitrage opportunity. Joe Rennison reports

As a general rule, regulators hate loopholes. However, if some derivatives users are to be believed, they’ve gone and created a whopping great big one that allows exchanges to launch futures contracts that are economically identical to over-the-counter swaps, but attract a fraction of the margin. With more of these contracts likely to be rolled out, OTC participants have become increasingly vocal over the past few months – complaining they are being put at a competitive disadvantage by new