August 2, 2019

New CFTC Talks Episode Explores Effects of Capital Rules

Washington, DC — A new episode of CFTC Talks, available today, looks at the effect bank capital rules have had on the competitive landscape of derivatives clearing.  Drs. Richard Haynes and Lihong McPhail, of CFTC’s Office of the Chief Economist, discuss their paper, When the Leverage Ratio Meets Derivatives: Running Out Of Options?

In this CFTC Talks episode, Haynes and McPhail discuss their study of the effects of the Basel III capital and liquidity requirements across different asset classes and different market participants. The evidence suggests that the leverage ratio requirement has pushed derivative clearing activities to less constrained institutions and market segments.

“Measuring the impact of particular regulations in a rigorous way can be quite challenging,” said CFTC Chief Economist Bruce Tuckman. “In this study, however, Drs. Haynes and McPhail, and their co-author, MIT Professor Haoxiang Zhu, cleverly approach the question of the effect of the leverage ratio on various derivatives markets.”

To listen and view the videocast, visit CFTC Talks. Subscribe to the podcast on iTunes by looking for CFTC Talks.