Craig Lewis, the chief economist and director of risk, strategy and financial innovation at the Securities and Exchange Commission, recently said that the commission is seeking to provide economic analysis in support of its new regulations.
Lewis, a finance professor on leave from Vanderbilt University, said during a public policy luncheon before the Women in Housing and Finance that he hopes to build a team that includes 90 PhD economists, all of whom will be dedicated to peer-reviewed research to be used in support of SEC rules.
Additionally, Lewis said that the SEC’s model had aided in the development of the commission’s recent rule defining a “swap dealer.” The originally proposed rule established a threshold that would designate nearly any swap user as a dealer. Using a systemic analysis of swaps, Lewis’s group was able to identify an activity gap, which was used to establish a new threshold that would exclude swaps users and net mostly dealers.
The model, which was originally developed by Lewis’s division to examine hedge fund performance, adapts to information reported by funds. Lewis said that using the model allows regulators to examine the industry more in depth.
“One of the important elements of the modeling environment is to use the information of..cases to inform the way you build and modify the model,” Lewis said, according to Compliance Intel. “There’s a feedback loop that we’re trying to work into the modeling framework…Our role is to try and develop a tool that the exam staff will find useful.”