Unintended Consequences of the Global Derivatives Market Reform

Pauline Gandré, Mike Mariathasan, Ouarda Merrouche and Steven Ongena

Journal of the European Economic Association, 2024, vol. 22, issue 6, 2467-2506

Abstract: Following the early implementation of the global over-the-counter (OTC) derivatives market reform in the USA and the associated increase in trading costs, US banks shifted up to 60% of their OTC derivatives activity abroad, particularly toward less regulated jurisdictions. Consistent with a cost saving incentive of regulatory arbitrage, we find that this flight abroad is driven by costlier blocks of the reform and subsequently causes a narrowing of swap spreads. We further show that this regulatory arbitrage causes an increase in financial risk as more activity is shifted to more lenient jurisdictions.

Date: 2024
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Related works:
Working Paper: Unintended Consequences of the Global Derivatives Market Reform (2024)
Working Paper: Unintended Consequences of the Global Derivatives Market Reform (2021)
Working Paper: Unintended Consequences of the Global Derivatives Market Reform (2021)
Working Paper: Unintended Consequences of the Global Derivatives Market Reform (2020)
Working Paper: UNINTENDED CONSEQUENCES OF THE GLOBAL DERIVATIVES MARKET REFORM (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:jeurec:v:22:y:2024:i:6:p:2467-2506.

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