Former CFTC Commissioner on Regulating Clearinghouses

The video discusses the role and risks associated with clearing houses, particularly in the context of systemic risk and the 2008 financial crisis. It highlights the historical performance of clearing houses, especially in derivatives markets, noting their stability and effectiveness. The speaker emphasizes the importance of ongoing regulation and testing, such as stress tests, to ensure financial stability. Current concerns and motivations for discussing systemic risk at conferences are also explored, with a focus on the need for adaptable regulations.

What is one reason large banks might prefer to manage risks themselves rather than through clearing houses?

• They have more control over their assets.

• Clearing houses charge high fees.

• Clearing houses have a history of failures.

• Banks are not allowed to use clearing houses.

Why might someone choose to discuss systemic risk at a conference?

• To highlight personal achievements.

• To address a topic that has been problematic.

• To gain attention for potential leadership roles.

• To avoid discussing other financial topics.

What is a key feature of the tests conducted by clearing houses?

• They focus solely on past financial crises.

• They are only required in the United States.

• They are similar to stress tests for financial institutions.

• They are optional and conducted annually.

How do clearing houses manage risk effectively?

• By conducting resolution and recovery tests regularly.

• By relying on external audits.

• By avoiding any form of testing.

• By holding large amounts of risk daily.

What is suggested as a potential improvement for clearing house tests?

• Making them less frequent.

• Increasing their granularity.

• Reducing their scope.

• Eliminating them altogether.