Fascinating new report by JPMorgan’s Josh Younger, who argues that bank regulation, not “algos”, is the primary cause of heightened volatility lately, as banks de-risk ahead of the end of the year. 
The G-SIB surcharges are the biggest problem in late Dec because they are only based on the year-end balance sheet.
These regulations HAVE made the financial system, but some aspects can have unintended consequence. Fortunately, they can pretty easily be addressed.
For example, you could tweak the surcharge buckets, or calculate it from a blended average balance sheet, rather than the year-end snapshot. That would probably ease the “aggressive” dealer de-risking in the last weeks of the year and make markets less vulnerable to a shock then.
Why Twitter is great: After posting this thread a tweep pointed out that the BIS actually quietly launched a consultation earlier this month on tweaking its approach precisely to address this issue. bis.org/press/p181213.…
