The Unfinished Business of Regulating Clearinghouses

The Dodd-Frank Act recently celebrated its 10th anniversary, with commentators, policymakers, and scholars joining the celebration by discussing the achievements of the sweeping post-crisis financial reform. Yet Dodd-Frank left critical unfinished business that, if not addressed, could erode the structural foundations of the post-crisis markets: the regulation of clearinghouses.

In a new article, I identify the flaws in the the current regulatory framework for clearinghouses. These flaws polarize rather than align the incentives of clearinghouses’ major stakeholders: the owners – companies such as the Chicago Mercantile Exchange Group, Intercontinental Exchange, and the London Stock Exchange Group – and the … Read more

Fixing the Repo Market: The Piece Regulators Missed When Reforming the Financial Markets

We all remember the hectic summer and fall of 2008, when the U.S. financial system was at the brink of collapse. Since then, policymakers have enacted structural reforms to the financial system but left the market in repurchase agreements largely untouched.

A repurchase agreement, or repo, is a sale of financial assets coupled with a promise to repurchase them later. Repos have economic characteristics similar to those of secured loans and bank deposits and are one of the main sources of liquidity for the U.S. financial system. Having developed free from the watchful eyes of regulators, the repo market has … Read more