A great paper from DTCC which paints a scary picture of the many ways our capital markets could be destabilised, including:

1. Cyber Attack
2. New Regulations
3. High Frequency Trading
4. Counterparty Risk
5. Collateral Flow
6. Market Quality / Stability / Reputational Risk
7. CCPs as Single Points of Failure
8. Business Continuity

Apart from that smorgasbord of danger, the piece I spotted were the quotes about new regulations as a source of systemic risk themselves:

• The U.S. Government Accountability Office, in response to the Dodd-Frank Act: “The implementation of many of these reforms remains ongoing and the effectiveness of some remains an open question.”
• Ms. Sheila Bair (former chair of the Federal Deposit Insurance Corporation): “We’ve accomplished a lot since the crisis…but many of the old problems remain, like Basel letting banks model their own risk. And it’s all got- ten much more complicated.”
• Mr. Wayne Abernathy, Executive Vice President of the American Bankers Association: “The costs and efforts of complying with all these rules are no longer worth the safety and soundness dividend they provide.”
• Commissioner Scott O’Malia, the U.S. Commodity Futures Trading Commission: “The Commission now re- ceives data on thousands of swaps each day. So far, none of our computer programs load this data without crashing. In a rush to promulgate the reporting rules, the Commission failed to specify the data format reporting parties must use when sending their swaps to swap data repositories.”
• Mr. Thomas Donohue, President and Chief Executive Officer of the U.S. Chamber of Commerce: “At the top of the list for our capital markets is the ongoing confusion over the mass of regulatory rulemaking spawned by Dodd-Frank. The law was written in anger and on the faulty premise that regulators could and should eliminate all risks from the system.”11

The full paper is here

: DTCC WHITE PAPER IDENTIFIES GREATER SYSTEMIC RISK COMPLEXITIES TO FINANCIAL MARKETS.