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Structural Conflicts in Central Banking: Regulator or Operator of a Payment System? (October 10, 2023)
In this webinar event, Aaron Klein (Brookings) discusses his WIFPR white paper, “Structural Conflicts in Central Banking: Regulator or Operator of a Payment System?” Central banks can operate national payment systems, either as monopolies or in competition with private systems. Central banks can be the payment system regulator. This paper analyzes the multiple and sometimes conflicting roles facing central banks and payment systems. The paper explores different objectives central banks are tasked with (or task themselves with), looking at whether these objectives are in agreement or in conflict with each other and with other mandates the central bank faces. A primary focus of the paper is to examine the impact of different roles of the central bank in the payment system with corresponding innovation, or lack thereof, in that nation’s payment system. The paper examines why America’s payment system became a global laggard in adopting better payment technology. Structural conflicts between the Federal Reserve’s role as regulator of America’s payment systems and operator of its own system, regulator of bank’s safety and soundness, and prioritization of objectives played various roles in America’s failure to modernize its payment system.
Wharton Conference on Liquidity and Financial Fragility (October 6-7, 2023)
WIFPR hosted the Ninth Wharton Conference on Liquidity and Financial Fragility, which featured papers by leading scholars on broad topics in liquidity and financial fragility. Thomas Philippon (NYU Stern) delivered the keynote address. Click here to see the program.
Payment for Order Flow and the Retail Trading Experience (October 3, 2023)
In this webinar event, Thomas Ernst (University of Maryland) and Chester Spatt (Carnegie Mellon) discuss their WIFPR white paper, “Payment for Order Flow and the Retail Trading Experience.” U.S. retail brokers have shifted to a business model with zero-commission trades, earning much of their revenue through payment for order flow (PFOF), under which wholesalers pay brokers to route the orders of their retail clients. The presence of PFOF has led to potential concerns about whether it leads to distortions in routing decisions by brokers, a reduction in market quality due to its effect in segmenting retail orders, or changes in the brokers’ incentives to encourage excess trading. While the recent SEC regulatory focus has been on equity markets, two-thirds of all PFOF comes from option markets. PFOF rates in option markets are much larger, creating a system where broker revenue is much higher when retail clients trade options compared to equities, leading to potential incentives to encourage option trading. We consider the current SEC proposal for order-by-order auctions in retail equity trading and its implications for retail investor welfare. We address three alternatives. First, we propose an expansion of equity Retail Liquidity Programs rather than mandated retail auctions. Second, we consider changes to option markets to reduce frictions, which could include fee caps, competitive designated-market-maker assignments, and a more competitive auction process. Finally, we suggest a PFOF-fee cap, which would preserve PFOF, while addressing the large cross-asset PFOF fee differences.
2nd Annual Women in Law and Finance Conference (September 29, 2023)
WIFPR co-sponsored the 2nd Annual Women in Law and Finance Conference, which featured presentations from academics on regulation, corporate governance, and other topics.
AALS Financial Regulation Midyear Conference (September 22, 2023)
WIFPR co-sponsored the Association of American Law Schools Financial Regulation Midyear Conference, which featured presentations from academics on a host of topics, including Silicon Valley Bank, crypto exchanges, and climate risk.
A Conversation with Neel Kashkari (September 25, 2023)
In this event, WIFPR hosted Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, for a Q&A with students, moderated by Wharton student Liam La Barge. Click here to watch the event.
- Federal Reserve bank president Kashkari expecting another rate hike
The Hill | September 26, 2023
- Fed’s Kashkari Says He Expects One More Rate Hike This Year
Bloomberg | September 25, 2023
- Fed’s Kashkari sees another rate hike, then a hold
Reuters | September 25, 2023
Wharton-Harvard Insolvency and Restructuring Conference (September 8-9, 2023)
The Wharton Initiative on Financial Policy and Regulation co-hosted the inaugural Wharton-Harvard Insolvency and Restructuring Conference on Friday, September 8, and Saturday, September 9, at the Wharton School.
The conference included presentations by academics across a range of disciplines on issues of leveraged finance, distress, and restructuring. The conference also included two practitioner panels: “Investing in and around Distress: The Changing Landscape” and “The Future of Chapter 11.”
The agenda is available here.
IMF-WIFPR Conference on Non-bank Financial Intermediation, Financial Stability, and Policy Responses (May 9, 2023)
In this event, WIFPR co-hosted a conference with the IMF on non-bank financial intermediation, financial stability, and policy responses at the IMF’s headquarters in Washington, DC. The conference featured academic presentations and panels with leading academic, industry, and policy experts on potential financial stability risks arising from various types of non-bank financial institutions. Click here to view the conference’s agenda.
A Conversation with Patrick T. Harker (April 11, 2023)
In this event, WIFPR hosted Patrick T. Harker, President of the Federal Reserve Bank of Philadelphia, for a conversation with Joao Gomes (Wharton). Click here to read Harker’s opening remarks.
Should the ceiling on deposit insurance be lifted? A debate (April 5, 2023)
In this panel event co-hosted with the Hutchins Center on Fiscal and Monetary Policy at Brookings, WIFPR co-director Peter Conti-Brown, Prasad Krishnamurthy (Berkeley Law), Patricia McCoy (Boston College Law), and Thomas Philippon (New York University) debate whether and to what extent the cap on deposit insurance should be lifted. Click here to watch the video.
Understanding the Banking Crisis (March 30, 2023)
In this panel event, WIFPR co-directors Peter Conti-Brown and Itay Goldstein joined Joao Gomes (Wharton) and Susan Wachter (Wharton) to discuss the collapse of Silicon Valley Bank and Credit Suisse and where things stand. Click here to watch the video.
Limitless: The Federal Reserve Takes on a New Age of Crisis (March 28, 2023)
In this panel event, Jeanna Smialek (New York Times) discussed her new book Limitless: The Federal Reserve Takes on a New Age of Crisis with Sarah Binder (GWU) and Peter Conti-Brown (Wharton). Click here to watch the video.
Crypto in Crisis (January 25, 2023)
In this panel event, Christine A. Okike (Kirkland & Ellis) and Brian Tichenor (Moelis & Company) joined Peter Conti-Brown (Wharton) to discuss the crisis in cryptocurrencies, what happens when a cryptofirm is in distress, and what role policymakers can play. Click here to watch the video.
Market Power and Financial Risk in U.S. Payments Systems (October 28, 2022)
In this webinar event, Joshua C. Macey discusses his WIFPR white paper, “Market Power and Financial Risk in U.S. Payments Systems.” This white paper argues that there is an unavoidable trade-off between regulations that would reduce risk to the financial system and those that would reduce the market power of the firms that control the interbank payments infrastructure in the United States. Regulatory and economic features of payments systems mean that regulators can (1) entrench bank market power, (2) accept a new source of systemic risk, or (3) expand the financial safety net beyond the bank regulatory perimeter. Recognizing that a private payments system involves a policy trade-off between bank market power and the safety and soundness of the financial system provides support for considering public payments options like the Federal Reserve’s “FedNow” or a well-designed central bank digital currency.
SPACs as Investment Funds (July 28, 2022)
In this webinar event, Robert Jackson and John Morley discuss their WIFPR white paper, “SPACs as Investment Funds.” This white paper argues that SPACs bear a striking resemblance to investment funds. SPACs invest in the same assets as investment funds, putting all of their money into securities as they search for deals. And they adopt the same pattern of organization as investment funds, relying entirely on management by external sponsors and advisers, many of whom also manage investment funds. This resemblance creates in SPACs many of the same unique agency conflicts that the regulation of investment funds was designed to address. In fact, we argue that many SPACs have been violating the Investment Company Act of 1940, the main law that governs investment funds. We show that soon after we filed a series of lawsuits alleging that some SPACs were violating the ICA in August 2021, new SPACs significantly changed their practices in ways that reduced their risk under the statute. We offer some suggestions to improve the SEC’s recent proposal to address the status of SPACs under the ICA and show how the proposal can help to protect investors.
Confronting the Challenge of Cross-Border Payments: A US Strategy for Central Clearing KYC (July 6, 2022)
In this webinar event, Christina Skinner discusses her WIFPR white paper, “Confronting the Challenge of Cross-Border Payments: A US Strategy for Central Clearing KYC.” For the past two years, the international community of financial regulators has been intently focused on improving the efficiency of cross-border payments. To date, this work has taken a wide lens in scoping the problem. This white paper focuses on what the U.S. could contribute to the cross-border payments initiative. It argues that the bulk of inefficiency in the current legacy system—corresponding banking—derives from frictions associated with anti-money laundering law and regulation. To streamline the process of conducting customer due diligence, specifically, the paper proposes moving toward a system of centralized verification. In particular, the paper sketches an idea for a new kind of payments market infrastructure—a centralized verifying party—that would act as a trusted, third-party intermediary verifying transacting parties within correspondent networks.