Over the past decade, European exchanges have undertaken enormous reforms in their trading platforms and internal governance. Automation of trading combined with the internationalization of the major trading institutions has significantly intensified pressures for the consolidation of exchanges...

In this paper, we have highlighted the potential implications of a move in the U.S. to T+1 on European financial institutions. We explain that while many European institutions feel that they are sheltered from this move, those that undertake trading activities in the U.S. will find that they...

The institutional arrangements for trading and settling securities in Europe remain fragmented along national lines, making cross-border trading costly. Consolidation efforts are under way, however, and major market centers have now emerged in France, Germany, and the United Kingdom. Although...

This article explains the new market abuse regime’s approach in broad terms. It will be introduced by the Financial Services and Markets Act 2000 (the act) when it takes effect in summer 2001. It also explains the interaction between the new regime and the rules of the Recognised Investment...

In this, the third paper in the Economists’ Hubris series, we highlight the shortcomings of academic thought in developing models that can be used by financial institutions to institute effective enterprise-wide risk management systems and policies. We find that pretty much all of the models...

Events such as the recent global financial crisis, the failure of Lehman Brothers, and the bailout of American International Group, have called increased attention to the opaque workings of the over-the-counter (OTC) derivatives markets which have remained unregulated until now. Nevertheless,...

Measuring, controlling and managing operational risk have played an important role for bank industry endeavors since the publication of Basel II (2006) as the regulatory framework for the effective management and supervision of financial risks. More recently, due to the current financial crisis,...

The regulatory framework established during the Great Depression was dismantled in stages after 1969. The deregulation of deposits at banks and savings institutions created incentives to widen the scope of investments that banks and thrifts could make. Novel instruments were created that should...

We present an overview of methods to estimate risk arising from operational losses. Our approach is based on the study of the statistical severity distribution of a single loss. We analyze the fundamental issues that arise in practice when modeling operational risk data. We address the...

A recurring criticism of U.S. bank supervisors is that their standards vary procyclicly with banking and economic conditions. The 2010 reforms of supervisory standards for bank capital adequacy and liquidity (Basel III) directly address procyclicality in supervision and its effects on credit...