Discussion paper

DP14802 UNINTENDED CONSEQUENCES OF THE GLOBAL DERIVATIVES MARKET REFORM

We investigate regulatory arbitrage during the G20’s global derivatives market reform. We hand-collect comprehensive data on the staggered
reform process and show that its progress is primarily driven by structural time-invariant factors. Following the reform banks shift up to 70 percent of their derivatives activity towards less regulated jurisdictions. This shift is driven by reform items – such as the promotion of central clearing – that are costly, but do not directly benefit them. Subsidiaries in jurisdictions with more regulatory progress shift into riskier portfolios.

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Citation

Gandré, P, M Mariathasan, O Merrouche and S Ongena (2020), ‘DP14802 UNINTENDED CONSEQUENCES OF THE GLOBAL DERIVATIVES MARKET REFORM‘, CEPR Discussion Paper No. 14802. CEPR Press, Paris & London. https://cepr.org/publications/dp14802