The Impact of Dodd-Frank on the US and Global Derivatives Business

This Capstone project examined the impact of Title VII of the Dodd-Frank Act on the US and global derivatives business.  The student team  began with an overview of the US and international derivatives markets before and after the financial crisis in terms of market size and major participants.  The team examined the intent and scope of Title VII, as well as its interactions with the Volker rule, the Collins Amendment and other international regulations. 

The team analyzed the effect of the DFA on the US derivatives market from a macro perspective, market perspective and institutional perspective.  To this end, first they determined the overall impact of DFA on the US economy by studying the redistribution of risk and the relationship between financial stability and economic growth.  Then, they explored potential consequences on various stakeholders such as banks, broker dealers, end users and clearing houses through the lens of capital ratio, liquidity and margin requirements. US competitiveness vis-à-vis other financial centers in Europe will be considered.  Finally, they studied Citi’s global reach, business presence and competitive advantage as a large financial institution vis-à-vis potential constraints brought by the DFA. They also identified the financial institutions best positioned for this changing environment. They concluded with specific recommendations for Citi as it shapes its business strategies for its short-term, medium-term and long-term future.