CFTC study finds Basel III leverage ratio caused US banks to lose derivative clearing share

5 August 2019 9:52pm
The Basel III leverage ratio has caused clearing of equity futures options to migrate from large, more stringently regulated US banks to US nonbanks and EU institutions subject to lower capital requirements, a US Commodity Futures Trading Commission study said.

“Our analysis showed that clearing E-mini futures options has shifted in the way we anticipated, from institutions that are more constrained by capital rules to those less constrained,” CFTC Office of the Chief Economist researcher Richard Haynes said in a podcast last week.

The finding could influence the US Federal Reserve’s pending proposal to improve the risk sensitivity of capital requirements, which CFTC members have said would discourage banks from clearing derivatives.