The Microstructure Exchange is a virtual academic market microstructure research seminar of indefinite length, intended to continue the sharing of ideas between researchers.
Speakers will be invited to present their work over Zoom. Seminars will last 45 minutes with questions asked at designated break points during the talk and a 15 minute Q&A session at the end of the session that will be organized by a moderator.
The Design of a Central Clearing Counterparty
with John Kuong (INSEAD)
May 25th, 11 am (EDT)
Abstract: This paper studies the benefits of central clearing and the design of a central counterparty (CCP) with an optimal contracting approach. Investors sign contracts to hedge an underlying exposure. There is counterparty risk because investors can default on the contract due to idiosyncratic shocks and moral hazard. Mutualization of losses can thus hedge against counterparty risk but demands collateral for preventing moral hazard. The optimal contract involves loss mutualization, which requires central clearing, only when the cost of collateral is intermediate. Furthermore, as loss mutualization dilutes investors’ incentives to monitor their counterparties, a third-party CCP can emerge as a centralized monitor and is given a first-loss, equity tranche as incentive compensation. Our results endogenize key features of the default resolution process, known as “default waterfall”, in a CCP. Finally, we show that larger user base of acontract favors central clearing (over bilateral trading) and clearing with third-party CCP (over member-owned CCP).
Seminars will take place on Tuesdays. Times may vary to accomodate a broader global audience and to meet the speaker’s schedule.
The calendar is available as a Google calendar or in iCal format.
To receive the Zoom link and the paper for upcoming seminars, please subscribe to our mailing list.
- Björn Hagströmer – Stockholm University (website or email)
- Katya Malinova – McMaster University (website or email)
- Andreas Park – University of Toronto (website, twitter, or email)
- Cameron Pfiffer – University of Oregon (website, twitter, or email)
- Andriy Shkilko – Wilfrid Laurier University (website, twitter, or email)
Email firstname.lastname@example.org with comments, questions, and feedback.
- Carole Comerton-Forde (recording)
- Greg Eaton (recording, paper, and slides)
- Milena Wittwer (recording and paper)
- Zhaogang Song (recording and paper)
- Darrell Duffie (recording, paper, and slides)
- Joel Hasbrouck (recording, paper, and slides)
- Evangelos Benos (recording, paper, slides)
- Pete Kyle (recording, paper, and slides)
- Hans Degryse (recording, paper, and slides)
- Haoxiang Zhu (recording, paper, and slides)
- Edwin Hu (recording, paper, and slides)
- Yan Xiong (recording, paper, and slides)
- Terry Hendershott (recording, paper, and (slides)
- Mina Lee (recording)
- Chaojun Wang (recording and paper)
- Thomas Marta (recording and paper).
- Thomas Ernst (recording and paper).
- Alexey Ivashchenko (recording, paper, and slides)
- Anthony Lee Zhang (recording and paper)
- Marius Zoican (recording, paper, slides, and video abstract)
- Mao Ye (recording, slides, paper, and video abstract)
- Eric Budish (recording, paper, and video abstract)
- Chester Spatt (recording, paper, slides, video abstract)
- Gideon Saar (recording, slides, and video abstract)
- Dmitriy Muravyev (recording, paper, and video abstract)
- Albert Menkveld (recording, paper, slides, and video abstract)
- Sophie Moinas (recording, paper, and slides).
- Maureen O’Hara (video abstract and paper). We apologize – the recording is not available due to a technical issue.
- Angelo Ranaldo (recording, slides, video abstract, and paper)
- Sunil Wahal (recording, slides, video abstract, and paper)
- Thierry Foucault (recording, slides, video abstract, and paper)
The Microstructure Exchange will host resources, tools, and data for microstructure researchers. Please contact email@example.com to add your resource to this section.
- Spread statistics from Sunil Wahal. The dataset contains nanosecond precision spreads (using four methodologies) of all common stocks and ETFs with valid data. See Conrad and Wahal (2020) for more information.
- Quote-to-trade ratios from the paper Quoting activity and the cost of capital by Ioanid Rosu, Elvira Sojli, and Wing Wah Tham. Wharton Research Data Services (WRDS) data was used in preparing this output.
- The 2021 Conference and JEDC Special Issue on Markets and Economies with Information Frictions call for papers is available. The conference will be held on August 30th-31st, 2021.
- The Eighth Annual Conference on Financial Market Regulation will be held on May 13-14, 2021 at the SEC headquarters in Washington, DC.
- The Microstructure Online Seminars Asia Pacific series hosts previous Microstructure Exchange speakers at times that better match the Australia, Hong Kong, and Singapore time zone.
- The Summer School on Market Microstructure, presented by Thierry Foucault and Albert Menkveld, will be hosted on June 7-11, 2021 at Stockholm Business School. It is a one-week intensive course, suitable for PhD students and advanced practitioners.