(Bloomberg) — State Street Corp. is closing down its swaps business after clients said new regulations steered them away for using the products.
The bank will shutter its U.S. business for clearing swaps early next year and will shelve plans to start a similar operation in Europe, Anne McNally, a spokeswoman for the Boston- based company, said in an e-mail statement Thursday.
State Street will instead focus on trading other types of derivatives, particularly more traditional exchange-traded futures, that have not been subject to broad new regulations imposed since the 2008 financial crisis.
Due to market and regulatory factors, our clients have largely evolved their investment strategies towards the use of futures and away from over-the-counter derivatives, McNally said in the statement.
State Street joins Bank of New York Mellon Corp. in exiting portions of the derivatives business in response to regulatory developments. BNY Mellon, the worlds largest custody bank, said in September that it was shutting its derivatives sales and trading business.
Global regulators moved to increase oversight of the $700 trillion swaps market after largely unregulated swaps helped fuel the 2008 crisis. The new rules seek to have most swaps guaranteed at clearinghouses, which accept collateral from buyers and sellers in order to reduce the risk in the trades.
