Assessing Transnational Private Regulation of the OTC Derivatives Market: ISDA, the BBA, and the Future of Financial Reform

42 Pages Posted: 3 Feb 2014 Last revised: 21 Apr 2016

See all articles by Gabriel V. Rauterberg

Gabriel V. Rauterberg

University of Michigan Law School

Andrew Verstein

University of California, Los Angeles (UCLA) - School of Law

Date Written: February 1, 2014

Abstract

For the last twenty years, the dominant narrative of the over-the-counter derivatives market has been one of absent regulation, deregulation, and regulatory conflict, predictably resulting in disaster. This Article challenges this narrative, arguing that the global derivatives market has been subject to pervasive and harmonized regulation by what should be recognized as transnational private regulators. Recognizing the reality of widespread transnational private regulation of derivatives has significant implications, which this Article explores. Appreciating the actual regulatory status quo is essential if policymakers are to correctly diagnose problems, avoid past regulatory errors, and plan effective remedies. There are also advantages to relying on private transnational regulation, as increased governmental effort to regulate the OTC derivatives space may undermine and fracture existing regulation. To be sure, private transnational regulation carries risks that have sometimes materialized, such as the manipulation of LIBOR. Thus, this Article also evaluates best practices in regulating through transnational private governance.

Keywords: Libor, BBA, OTC, Derivatives, ISDA, Swaps, Transnational Private Regulation, deregulation, regulation, harmonization, CFTC, SEC

Suggested Citation

Rauterberg, Gabriel V. and Verstein, Andrew, Assessing Transnational Private Regulation of the OTC Derivatives Market: ISDA, the BBA, and the Future of Financial Reform (February 1, 2014). Virginia Journal of International Law, Vol. 54, No. 1, 2013, Wake Forest Univ. Legal Studies Paper No. 2389371, Available at SSRN: https://ssrn.com/abstract=2389371

Gabriel V. Rauterberg

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States

Andrew Verstein (Contact Author)

University of California, Los Angeles (UCLA) - School of Law ( email )

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