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http://ssrn.com/abstract=1485518
 
 

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Regulate OTC Derivatives by Deregulating Them


Lynn A. Stout


Cornell Law School - Jack G. Clarke Business Law Institute

Jean Helwege


University of South Carolina

Peter J. Wallison


American Enterprise Institute (AEI)

Craig Pirrong


University of Houston - Department of Finance

Fall 2009

Regulation, Vol. 32, No. 3, pp. 30-41, Fall 2009
UCLA School of Law, Law-Econ Research Paper No. 09-22

Abstract:     
As a result of the current financial crisis, there have been many calls for strict new regulation of over-the-counter financial derivatives. This paper proposes, instead, that we return to the now-voided common law on derivatives and consider them non-legally enforceable gambling contracts except when one of the parties can prove a bona fide hedging purpose. Doing this would not outlaw derivatives, but would instead require the rise of private institutions to enforce and control them, and would discourage their use for wild speculation. The paper includes appended comments from Jean Helwege (Penn State University), Peter Wallison (American Enterprise Institute), and Craig Pirrong (University of Houston), as well as a response from the author.

Number of Pages in PDF File: 12

Keywords: OTC derivatives, derivatives, Irwin v. Williar, CDS, speculation, Commodities Futures Modernization Act

JEL Classification: G1, G13, K12, K22

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Date posted: October 12, 2009 ; Last revised: November 1, 2009

Suggested Citation

Stout, Lynn A. and Helwege, Jean and Wallison, Peter J. and Pirrong, Craig, Regulate OTC Derivatives by Deregulating Them (Fall 2009). Regulation, Vol. 32, No. 3, pp. 30-41, Fall 2009; UCLA School of Law, Law-Econ Research Paper No. 09-22. Available at SSRN: http://ssrn.com/abstract=1485518

Contact Information

Lynn A. Stout (Contact Author)
Cornell Law School - Jack G. Clarke Business Law Institute ( email )
524 College Ave
Myron Taylor Hall
Ithaca, NY 14853
United States
607-255-8431 (Phone)
Jean Helwege
University of South Carolina ( email )
Columbia, SC 29208
United States
Peter J. Wallison
American Enterprise Institute (AEI) ( email )
1150 17th Street, N.W.
Washington, DC 20036
United States
202-862-5864 (Phone)
202-862-7163 (Fax)
HOME PAGE: http://www.aei.org/scholars/wallison.htm
Craig Pirrong
University of Houston - Department of Finance ( email )
Houston, TX 77204
United States
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