But the move could inflame concerns that there already weren’t enough options for traders, potentially exposing the market to a shutdown in the event of an outage at a large settlement firm.

When evaluating at systemic risk, regulators look at (among other factors) whether there are alternatives available for market participants if a service becomes unavailable. If BoNY/M goes down, there are no other market participants.

Now imagine that you are a service provider to BoNY/M, and BoNY/M relies on your service to provide settlement services to its customers. The level of scrutiny you will come under by BoNY/M and its regulators just increased exponentially. It’s probably not the type of exponential growth for which you were hoping.

If you are a malicious actor, and you wanted to disrupt a critical aspect of the U.S. financial markets, you just found a choke point. I’d be interested in comparing the number and severity of attacks on BoNY/M before and after JPMC’s exit.

Source: This Boring Service Is Suddenly a Big Concern for Treasurys – WSJ