To Clear or Not to Clear

Dmitry Pugachevsky, Quantifi, and Alex Tabb, Group Partner and COO, TABB discuss the possibility for regulatory arbitrage between the US and European markets, the impact the new rules will have on the cost of initial margin for exchange-traded derivatives, and how this will drive firms' decisions on which products to trade

 

The US implementation of the Basel directives, which will be rolled out in the US in January 2014, increases the liquidity coverage ratio and eliminates CVA exemptions, significantly raising the pressure on US banks' capital.The cost of capital in North America will be greater than the cost in Europe, so one assumes that will lead to regulatory arbitrage in the trading environment.

 

 

 

Recommended Whitepapers and Articles

Whitepaper: Cost of Trading and Clearing OTC Derivatives in the Wake of Margining

A First View on the New CVA Risk Capital Charge

Identifying Liquidity Risk for Financial Stability

Challenges in Implementing a Counterparty Risk Management Process