Financial Transnationalism and Financial Regulation Change: A Case Study of Derivatives Markets

Posted: 27 Dec 2016

See all articles by Simin Gao

Simin Gao

Tsinghua University Law School

Christopher C. Chen

Singapore Management University School of Law

Date Written: December 25, 2016

Abstract

This article investigates the transnational flow of state, non-state and supranational norms governing over-the-counter (OTC) derivatives at both the contractual and regulatory levels. Our analysis reveals that the flow of these norms has fashioned a multi-layered transnational legal order. The flow of norms involves the dynamic processes of ‘uploading’ by powerful markets and ‘downloading’ by peripheral states. Asymmetry in economic power between states drives the transnational flow of norms, which are carried by players such as financial intermediaries, professionals, international organisations and regulators. We observe that various factors may affect the outcomes of transnational flow, resulting in different degrees of convergence or divergence in peripheral states. We examine the norms governing OTC derivatives, and find that the transnational flow of contractual norms (specifically the International Swaps and Derivatives Association Master Agreement) results in a high degree of convergence. However, the downloading of regulatory norms depends on the economic situation, market conditions and other national interests of peripheral states. This article shows that powerful states can expect smaller markets to accept uploaded norms when the benefits involved are reciprocal and the norms do not conflict with more pressing local concerns. Under the right conditions, therefore, regulations can be globally harmonised without the need for international treaties.

Keywords: over-the-counter (OTC) derivatives, Financial Transnationalism

JEL Classification: K33, K22, F0, F3, F6

Suggested Citation

Gao, Simin and Chen, Christopher C., Financial Transnationalism and Financial Regulation Change: A Case Study of Derivatives Markets (December 25, 2016). European Business Organization Law Review, 2017. Available at SSRN: https://ssrn.com/abstract=2889908

Simin Gao (Contact Author)

Tsinghua University Law School ( email )

Beijing, 100084
China

Christopher C. Chen

Singapore Management University School of Law ( email )

55 Armenian Street
Singapore, 179943
Singapore

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