Regulatory Arbitrage, Extraterritorial Jurisdiction and Dodd-Frank: The Implications of US Global OTC Derivative Regulation

78 Pages Posted: 31 Oct 2012 Last revised: 5 Jun 2014

Christian A. Johnson

Widener University - Commonwealth Law School

Date Written: April 30, 2014

Abstract

A review of the Dodd-Frank rulemaking projects suggests that the U.S. has entered into a “race to the top” of over-the-counter derivative regulation. Many of the Dodd-Frank statutes and proposed rules go well beyond the relatively modest objectives agreed to by the G20 countries in 2009. These efforts in the U.S. create a legal environment ripe for regulatory arbitrage and the isolation of U.S. OTC derivative markets. Isolation results from participants simply abandoning U.S. markets because of overly aggressive U.S. regulation. Regulatory arbitrage occurs as both U.S. and non-U.S. persons attempt to structure their trading activities to avoid the extraterritorial reach of Dodd-Frank. This paper will discuss the regulatory arbitrage implications triggered by the Dodd-Frank reforms and concerns surrounding the extraterritorial powers given to the CFTC to enforce these mandates.

Keywords: over-the-counter derivative, OTC derivative, regulatory arbitrage, extraterritoriality, extraterritorial jurisdiction, Dodd-Frank, Dodd Frank

JEL Classification: E44, E58, F02, G15, G18, N20

Suggested Citation

Johnson, Christian A., Regulatory Arbitrage, Extraterritorial Jurisdiction and Dodd-Frank: The Implications of US Global OTC Derivative Regulation (April 30, 2014). University of Utah College of Law Research Paper No. 16. Available at SSRN: https://ssrn.com/abstract=2169401 or http://dx.doi.org/10.2139/ssrn.2169401

Christian A. Johnson (Contact Author)

Widener University - Commonwealth Law School ( email )

3800 Vartan Way
Harrisburg, PA 17110-9380
United States
717.541.3902 (Phone)

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