Search Results
Showing results 1 to 2 of approximately 2.
(refine search)
Working Paper
An Empirical Analysis of Futures Margin Changes: Determinants and Policy Implications
Margin regulation raises two policy concerns. First, an alignment of margins to volatility can amplify procyclicality, leading to a build-up of excess leverage in good times and a forced deleverage in bad times. Second, competition among central counterparties (CCPs) can result in lower margin levels in order to attract more trading volume, which is referred to as a "race to the bottom." Motivated by these issues, we empirically analyze the determinants of margin changes by using a data set of various futures margins from Chicago Mercantile Exchange (CME) Group. We first find that CME Group ...
Discussion Paper
Externalities in securities clearing and settlement: Should securities CCPs clear trades for everyone?
The architecture of securities clearing and settlement in the United States creates an externality: Investors do not always bear the full cost of settlement risk for their trades and can impose some of these costs on the brokerages where they are customers. When markets are volatile and settlement risk is high, this externality can result in too much or too little trading relative to the efficient level, because investors ignore trading costs but brokerages may refuse to allow investors to trade. Both effects were evident during the recent volatility in GameStop stock. Alternative approaches ...