Paolo Saguato

Paolo SaguatoEmail: p.saguato@lse.ac.uk
Room: New Academic Building 7.24
Tel: 020-7107-5137

Paolo Saguato, LSE Fellow, joins LSE after a year as a Global Hauser Fellow at New York University School of Law where he was affiliated with the Center for Financial Institutions and conducted research on the repurchase agreement market. From 2012-2013 Paolo was a Visiting Researcher at St. John’s College - University of Oxford and from 2011-2012 he attended Yale Law School as a Fulbright Scholar where he was a Senior Editor of the Yale Journal of Regulation.

Paolo holds a Ph.D. in ‘Private, Business, and International Law’ from the University of Genoa; a LL.M. degree from Yale Law School; and a Law Degree (summa cum laude) from the University of Genoa.

 

Research Interests

Paolo’s research interests broadly span financial law and regulation as well as banking law and regulation. More specifically, his research examines the dynamics of financial systems and global financial regulation, the role of financial derivatives and financial innovation, and the intersections between private and public regulation of financial markets. Over the past few years, Paolo has focused on post-crisis reforms of securities and derivatives, with a particular emphasis on financial market infrastructures and the shadow banking system.

  
External Activities

Academic member ECGI (European Corporate Governance Institute)

Senior Fellow at the Genoa Center for Law and Finance
 

 
Selected articles
and chapters in books
 

'The Liquidity Dilemma and the Repo Market: A Two-Step Policy Option to Address the Regulatory Void' LSE Law Society and Economy Working Paper Series, WPS 21-2015

A repurchase agreement (repo) is the sale of financial assets coupled with a promise to repurchase the same assets at a later date. With similar economic characteristics to secured loans and bank deposits, the repo market is one of the main sources of liquidity for financial markets and a vital segment of the US financial system. During the financial crisis of 2007-2009, when the markets crashed and the value of many assets dropped, repo lenders lost confidence in the repo market and massively withdrew their financing. Panic then ensued, drying up the liquidity in the markets. The over-reliance on short-term repo financing magnified the liquidity crunch, and financial institutions such as Lehman Brothers and Bear Stearns were brought to the brink of ruin. The crisis unveiled the deep opacity of the repo market, its proneness to runs, its structural weaknesses, the interconnectedness of its participants, the absence of stability buffers, and the lack of any comprehensive regulatory or supervisory framework. Astonishingly, however, the post-crisis regulatory agenda almost completely ignored the repo market. Though depicted as a reform intended to create a safer financial system, the Dodd-Frank Act essentially left untouched this important source of systemic risk.
    After outlining the repo market and shedding new light on its structural instability, this paper presents an alternative narrative of the crisis by arguing that the structurally weak repo market triggered a liquidity crunch that halted the engine of the financial system. In doing so, the paper challenges the assumption that the crisis was caused merely by over-the-counter derivatives, securitization, and too-big-to-fail institutions.
     This paper shows how the repo market has developed within the financial markets – free from the watchful eyes of regulators and capitalizing on regulatory arbitrage – and challenges the regulatory void of the Dodd-Frank Act vis-à-vis the repo market. Specifically, this paper presents an original two-step policy option for assessing the repo market, based on the lesson of the post-crisis reforms of over-the-counter derivatives market as well as the incremental role envisioned by lawmakers for “financial market infrastructure” and central clearing counterparties as stability mechanisms. This paper calls for the assessment of the necessity of a structural intervention in the repo market to fix the failures that currently characterize it, and suggests that more transparency, coupled with a strong financial market infrastructure, would make the repo market more transparent, stable, and resilient.

'Financial Market Infrastructures' (with Guido Ferrarini), in Niamh Moloney, Eilis Ferran and Jennifer Payne (eds.), Oxford Handbook of Financial Regulation  [FORTHCOMING]

This chapter focuses on the impact of financial market infrastructures (FMIs) and of their regulation on the post-crisis transformation of securities and derivatives markets. It examines, in particular, the role that trading and post-trading FMIs, and their new regulatory regime, are playing in the expansion of ‘public’ securities and derivatives markets, and the progressive shrinkage of ‘private’ markets (which broadly coincide with the ‘unregulated’ or ‘less regulated’ over-the-counter (OTC) markets).
    The paper provides an overview of the policy approaches underlying the international crisis-era reforms to FMIs, and focuses on the dichotomy between the ‘systemic risk’ and ‘transaction costs’ approaches to financial markets and FMIs regulation. By reviewing the current move from ‘private’ markets to ‘public’ markets internationally, and with respect to the EU and US regimes, we analyze the role of trading infrastructures as liquidity providers, both in the securities markets and in the derivatives markets. And, shifting the focus to post-trading infrastructures – central clearing houses (CCPs), central securities depositories (CSDs), and trade repositories (TRs) – we address their role in supporting financial stability and market transparency. We conclude by identifying how regulators are now more deeply involved in FMIs’ governance and operation. We argue that such policy approach resulted in regulatory initiatives which move in the direction of increasing the systemic scope of FMIs, introducing elements of publicity in private markets, and calling for higher public supervision.

'Reforming Securities and Derivatives Trading in the EU: Public v. Private Markets' (with Guido Ferrarini), 13(2) Journal of Corporate Legal Studies 2013

The financial crisis has generated a deep revision of the regulation of securities and derivatives markets. In this paper, we critically examine the extent to which current reforms, such as the European Market Infrastructure Regulation (EMIR) and the proposed Markets in Financial Instruments Directive (MiFID II) and Regulation (MIFIR), will expand ‘public’ securities and derivatives markets, while correspondingly reducing the scope of ‘private’ markets (which broadly coincide with the ‘unregulated’ over-the-counter markets). We also ask whether these reforms will on the whole reduce systemic risks and transaction costs of securities and derivatives trading in Europe. For these purposes, we formulate conjectures that are partly based on the experience of past reforms in the area equity trading.

‘Private Regulation in the Credit Default Swaps Market: The Role of ISDA in the New Regulatory Scenario of CDSs', in Geoffrey P. Miller and Fabrizio Cafaggi (eds.) The Governance And Regulation Of International Finance 2013

La trasparenza proprietaria sulle posizioni in derivati cash-settled: un contributo al dibattito, (with Guido Ferrarini and Paolo Giudici), in Strumenti finanziari e fiscalità, 0, 2010 (“The transparency of cash-settled equity swaps: a contribution to the debate”)

Partecipazioni rilevanti e catene di controllo, in Le Società, 1/2010 (“Relevant holdings and pyramidal structures”)6.