Presenter: Professor Paolo Saguato – Assistant Professor of Law at George Mason University, Antonin Scalia Law School
Discussant: Professor Howell Jackson – James S. Reid, Jr., Professor of Law at Harvard Law School
What are clearinghouses? Why do they keep regulators up at night? And why are they a very delicate and contentious issue in the Brexit negotiations? Clearinghouses, operate by firm such as the Chicago Mercantile Exchange, London Clearing House, Eurex, and Intercontinental Exchange, are the plumbing of modern financial markets, they stand between trading parties and guaranty the performance of each processed transaction. After the 2008 financial crisis, policymakers have embraced them as systemic risk managers and stability buffers. But who is on the hook if a clearinghouse were to fail? How are losses allocated? Clearinghouses are unique firms, with singular history, and a unique capital and governance structure. This paper/talk wants to dive into the organization of clearinghouses, challenge the existing regulatory framework, and offer policy solutions to create more resilient market infrastructures.