How Should Regulators Measure A Hedge Fund's 'Footprint'?

While post-crisis regulations are well-established for systemically important banks, and well on their way for SI insurance companies, regulators are really just starting to think about the details of addressing non-bank non-insurance (NBNI) financial companies: money market funds, mutual funds, hedge funds, asset managers. It’s a long list, and there aren’t necessarily systemically important institutions in every category, but the Financial Stability Board (FSB) and the International Organization for Securities Commissions (IOSCO) have started laying down guidelines this year. To give you an idea of how much work remains to be done, the Managed Funds Association is pushing back on how the FSB proposes to measure a hedge fund’s ‘market footprint’.

“While simplicity is a reasonable consideration in determining...