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Unintended Consequences of the Global Derivatives Market Reform. KU Leuven
Following the early implementation of the global over-the-counter (OTC) derivatives market reform in the US and the associated increase in trading costs, US banks shifted up to 60% of their OTC derivatives activity abroad, particularly towards less regulated jurisdictions. Consistent with a cost saving incentive of regulatory arbitrage, we find that this flight abroad is driven by costlier blocks of the reform and subsequently causes a narrowing ...