@gilesmond

For market makers, regulatory clarity reduces uncertainty and compliance costs, indirectly lowering holding risk. Explicit rules allow clearer capital allocation and reduce potential penalties. Yet new obligations, like reporting or higher capital requirements, can add costs. The balance depends on jurisdiction. Key areas include licensing fees, transaction reporting, and restrictions on leverage or inventory. Monitoring regulatory cost structures and exemptions helps estimate net benefit. Generally, clearer rules increase participation and lower spreads, as reduced legal risk outweighs incremental compliance expenses, especially for professional liquidity providers.

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