To the many atrocities that can be attributed to Dodd-Frank, add the persecution of derivatives brokers.
New York-based interdealer broker GFI Group Inc. submitted an application to open a proprietary U.S. futures exchange, according to documents filed by the company, while rivals including Icap PLC and BGC Partners Inc. weigh similar efforts.
The moves come in response to new regulations outlined by the 2010 Dodd-Frank financial law, which tightened trading practices in the $639 trillion market for privately traded derivatives called swaps.
New regulations designed to curb systemic risks have added costs and complexity for the banks and asset managers that trade swaps, prompting some to evaluate futures contracts as a cheaper alternative for hedging risks.
That potential migration represents a threat to the franchises of interdealer brokers like GFI, which have for decades been the facilitators of swap trades among Wall Street banks.