Regulators want more control.

The Financial Stability Board (FSB) is pushing for stricter rules on hedge fund leverage. They argue that excessive borrowing creates systemic risks.

But industry giants—Citadel, Millennium, AQR, and others—are pushing back. They warn that:

• Restricting leverage could reduce market liquidity.
• Transparency rules could expose strategies to competitors.
• Hedge funds aren’t banks and shouldn’t be regulated like them.

At the center of this fight is the Treasury basis trade. Hedge funds use it to exploit price differences, but regulators worry about risk concentration.

Who’s right? The answer will shape markets for years.

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