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Abstract:
Self-regulation should involve expertise, and efficiency, and may work better across national borders than legal regulation anchored to a particular national legal system. On the other hand, self-regulation may be self-interested regulation. The paper describes recent changes in financial exchange structure and how regulators are reacting to these changes. I examine arguments for and against treating the new exchanges as self-regulatory bodies, and argue that we should move away from traditional self-regulation of exchanges, and instead move explicitly towards a system of co-regulation of exchanges and their competitors in which stakeholder interests are consciously built into the regulatory system. The development of multinational exchanges and transnational linkages between exchanges makes the nurturing of co-regulation in exchanges more problematic. A first attempt to solve this problem should involve building co-regulation into our models of how to regulate exchanges at the domestic level, at the regional level, and at the supranational level through bodies such as IOSCO.

self-regulation, stock exchange, demutualization

Abstract:
IPOs and stock exchanges in virtual worlds such as Second Life raise a number of issues for real world financial regulators as well as for player-inhabitants of virtual worlds and academic researchers who focus on virtual worlds. The paper argues that under current rules some virtual world financial transactions constitute transactions in securities, and are therefore subject to registration requirements and fraud liability under the securities laws. Treating this virtual financial activity as only an aspect of the game would risk encouraging fraud. Thus an exemption regime would be desirable to distinguish between game activity with a financial theme and scams. Beyond this technical question the paper raises questions for future research about whether and how virtual world financial activity may affect players' expectations and behavior in real world financial markets.

Abstract:
Transnational financial transactions create new opportunities for private groups to influence legal and regulatory rules. Whereas the harmonization of financial law that follows from the increasing significance of transnational transactions looks as though it occurs through processes which are public, state-centred and transparent I describe three ways in which private and opaque processes have a significant influence on policy development in the area of financial law. These are private international law-making through private involvement in public rule-making processes, through contracting, and through the actions of private sector regulatory entrepreneurs.

Abstract:
Increased legal harmonization reinforces the need for a new way to test legal rules. As legal diversity decreases, there are fewer alternate rules to draw from, and thus potentially useful de facto experimentation with alternative rules becomes rarer and more difficult. This article argues that the ability to test legal rules in virtual worlds could help to solve a long-running, and worsening problem in the design of legal rules - the barriers to experimentation caused by an increasing tendency to the harmonization of law. In a world where real world experimentation with legal rules is likely to be useful, but also difficult and expensive, experimentation with legal rules in Virtual Worlds may be a valuable substitute. Large numbers of enthusiastic players in Virtual Worlds could test legal rules in an environment closer to the real world than many of the experiments that behavioral economists run to test economic behavior.

Abstract:
Focusing on the consumer's role in EU decision-making illuminates the tension between a model of supranational rule-making as an expertised, technocratic, administrative domain, and a model of regional integration as an extension of domestic democratic politics. The European project for internal market integration has developed from the technocratic model which had a relatively limited impact on the lives of individual European voters to a much more far-reaching model with enhanced democratic aspects. The paper focuses on the EU's processes for developing harmonized rules of financial regulation, and on the role of consumers in these processes, from their involvement in consultation through the European Economic and Social Committee, to a more recent, more visible, role as stakeholders in the regulatory process. This change has occurred as EU-level rules increasingly pre-empt national decision-making with respect to financial regulation, and as commentators have identified an accountability deficit in supranational standard-setting and rule-making bodies.

Consumer groups and financial trade associations have different views on what quantity and what varieties of harmonization are desirable. Consumer groups and trade associations disagree even about the management of the process of rule-making. The difficulty of resolving the tensions between the views of consumer groups and financial firms in the context of financial services policy raises real questions about the potential of functional participation to legitimate European rule-making in this area.

Abstract:
Changes in the market for information are challenging financial regulation by disrupting settled distinctions on which financial regulation depends. In some cases these settled distinctions are based on explicit or implicit understandings of technological conditions, in other cases the distinctions are based on factors independent of the state of technology. This article examines three regulatory distinctions which appear to be challenged by technological development: between traditional news sources and regulated investment publications; between professional and non-professional market participants; and between sophisticated and unsophisticated investors. The article argues that regulatory distinctions based on implicit understandings of technological conditions should be revised when the technology changes. Where rules are based on factors other than the state of technology they should be reviewed to ensure that technological change does not disrupt their application. In particular, regulators should not assume that investors experience information online in the same way that they do offline information. Changing patterns of information-gathering and decision-making by investors require revisiting core assumptions of securities law: that only rational investors deserve statutory protections; that impersonal trading advice is not "investment advice"; and that it is easy to distinguish between professional and non-professional and between sophisticated and unsophisticated investors.

financial regulation, securities regulation, technological change

Abstract:
Within supranational regulatory processes there is an inevitable tension between local and supra-local interests, as there is within federal states such as the US. In their interventions in supranational and domestic regulatory processes financial trade associations often argue against local rule-making authority.

The paper focuses on two separate sets of arguments which financial trade associations employ within these multilayered regulatory processes: that domestic and regional regulators should conform their actions to the actions of regulators in other jurisdictions (harmonization rhetoric), and that proposed regulations would undermine the workings of the international financial markets (market protection rhetoric).

The paper identifies examples of uses of the harmonization and market protection rhetorics. In particular, the paper will show that financial trade associations use these rhetorical strategies with some success in the context of domestic regulation as well as in the context of supranational rule-making. In response to arguments based on harmonization rhetoric, the UK's FSA has taken on board the idea that domestic regulators should not "gold-plate" EU rules when implementing them in the UK. US banking regulators have suggested that they are conscious of the need not to impose rules on US based banks which have a negative impact on their competitiveness with banks based in other jurisdictions.

Financial trade associations in the US have invoked market protection rhetoric to argue that state predatory lending regulation threatens consumers' access to credit because it risks foreclosing opportunities for securitisation of loans. The paper argues that the invocation and acceptance of these rhetorical devices has the effect of distancing consumers from multilevel regulatory processes, and thus has implications for the legitimacy of those processes.

financial markets, multilevel regulation, harmonization

Abstract:
The market for credit ratings is a transnational market dominated by a small number of credit rating agencies (CRAs). The article examines how CRAs have used market protection rhetoric and harmonization rhetoric during the crisis in the financial markets. As criticisms of pre-crisis financial regulation proliferated one might have expected CRAs to be less forceful in their resort to market protection rhetoric. CRAs’ lobbying strategies have evolved as discussions about the broader future of financial regulation have evolved, and they have conceded a greater role for regulation in 2009 than they had before the crisis, but they continue to emphasize, with some success, that as a global business they should not be subjected to different rules in different jurisdictions, and to insist that the core of their methodological approaches to rating should be unregulated.

credit rating agencies, multilevel regulation

Abstract:
Two contrasting narratives about the impact of the Internet on investors point to different responses by regulators: a narrative of empowerment suggests that regulators should encourage investors to make investment decisions for themselves. But a narrative of vulnerability suggests that these investors may not be able to use the information that is available, and may be at increased risk of loss. Regulators should aim to promote investor empowerment while taking due account of investor vulnerabilities.

Three characteristics (immediacy, interactivity, and interjurisdictionality) distinguish online investment information from offline investment information and have implications for the regulation of online information.

Abstract:
The global financial crisis renders visible and urgent a perennial (although often ignored) tension in financial regulation with respect to the extent to which governments should intervene to fix the financial markets. Because the maintenance of confidence is at the heart of much financial regulation, a massive lack of confidence seems to be a significant market or regulatory failure justifying governmental intervention. However, some governmental responses to the financial market crisis seem to treat the preservation of confidence in the markets (rather than the preservation of market integrity) as the fundamental concern of regulation. The paper argues that adopting emergency measures to manipulate the markets in the interests of improving confidence risks undermining the ability of regulators to control the behavior of financial institutions for the future in any meaningful way.