Harvard Business Law Review Online, Forthcoming
14 Pages Posted: 27 Feb 2013 Last revised: 18 Mar 2013
Date Written: February 25, 2013
This essay outlines the rough contours of a conceptually new regulatory scheme based on mandatory pre-market government licensing of derivatives and other complex financial instruments. Contrary to the current approach to regulating derivatives markets, the proposed product approval regime explicitly aims to control the amount and types of risk before it is introduced into the financial system. In that sense, it is a true gatekeeping mechanism, a potentially more effective form of ex ante – as opposed to ex post – regulation of systemic risk in financial markets.
Keywords: derivatives, financial regulation, regulatory reform, Dodd-Frank, product approval, financial innovation, complexity, speculation, systemic risk
Suggested Citation: Suggested Citation
Omarova, Saule T., From Reaction to Prevention: Product Approval as a Model of Derivatives Regulation (February 25, 2013). Harvard Business Law Review Online, Forthcoming; UNC Legal Studies Research Paper No. 2224200. Available at SSRN: https://ssrn.com/abstract=2224200
By Dan Awrey