LaSalle Street: Financial Markets Insights The Podcast of the Financial Markets Group at the Federal Reserve Bank of Chicago

As you know, before coming to the WFE, I worked at the Bank of England and was involved in many of the risk modeling discussions there, including some related to the drafting of the VM new technical standards. [...] I mean, to a large degree, I think, uh, both of what-, what you have said -- and Ketan, I think if you're referring to-, to the paper that you wrote, in addition to that from the B of E, I mean it's essential to distinguish VM from -- or I should say VM and options premium -- from the forward-looking components. [...] And there's a trade-off there and I think that that's a very interesting conversation for-, for the market to have of, what is the rate of change and its relation to a tolerance for exceedances? For the reduction of buffers, this is very difficult because the CCP usually .. [...] Some of them are to help, uh, with the capital treatment and sort of jurisdictions of client clearing; others are to bring more of the larger clients to be closer to being full members 14 LaSalle Street Podcast Episode 6 Transcript themselves; and in other places, I would think it's more a method of providing greater segregation of the margins of-, of the customers. [...] For the other side of the coin, I think that it's essential that the clearing members have viable businesses, right? So, they’re -- this has often been discussed in the industry that the hybrid models for client clearing are part of a larger conversation of our clearing members -- for instance, charging enough for the services they provide; um, are they being compensated for the risk they take on?.