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The institutional arrangement chosen by the leading nations in order to address financial regulatory reform in the wake of the 2007-2009 crisis exhibits two key features of global economic governance innovation. First, it employs a minilateral approach, restricting the participants that negotiate new regulatory standards to a few, highly involved stakeholders. Second, it relies heavily on government networks that operate on the basis of soft law. The arrangement circumvents the traditional intergovernmental model that has proven overly rigid and ineffective in addressing the problems that arise from highly interconnected and fast-changing global markets. Current theories of global economic governance predict that this twofold innovation enhances the effectiveness of financial regulatory reform. Yet a study of the evolution in over-the-counter (OTC) derivatives regulation shows that this is not the case. The paper then exposes three obstacles to cross-border regulatory cooperation between the two dominant players, the European Union and the United States. Authorities on both sides of the Atlantic are concerned about the distributive consequences of regulation, legislators and legislation hinder cross-border harmonization, and government networks are weak and incomplete. The paper concludes with suggestions of how to overcome coordination failure and theoretical implications for the political economy of networked governance.

This paper uses new research into the derivatives markets to develop our understanding of standard form contracts as transnational law and to show how transnational law theory may be usefully informed by empirical work. Traditionally, it has been assumed that international business communities seek to avoid the courts. However, the paper shows that the national courts play a prominent role in adjudicating disputes involving derivatives. Basing the discussion on the detail of these decisions by the English courts, the paper demonstrates that adjudication does not necessarily undermine widely used standard form contracts, and that it may even reinforce practices that underpin them. This is particularly the case where there is imperfect co-incidence between a trade association's members and a standard form contract's users. Having explored recent cases, the paper reconciles its findings with a more open and imaginative account of the role of national courts within transnational law theory.

In the aftermath of the 2008 global financial crisis, European Union regulators introduced the mechanism of ‘third-country equivalence’ for non-European financial institutions to access the EU internal market. This article evaluates for the first time the GATS-consistency of the European rules on third-country clearinghouses. Through this exercise, the article sheds light on the tension between financial regulation and WTO law, exploring how these two different disciplines can be reconciled. Building on the international economic law principles of non-discrimination and transparency, the analysis reveals that the European financial regulation could negatively impact the access of smaller countries to the EU market. The regulation in question is assessed under the GATS Article VI (Domestic Regulation), Article II (MFN), Article VII (Recognition), and the Annex on Financial Services prudential carve-out. The findings of the European case study indicate that the vast flexibility that trade law has delegated to national regulators possibly has adverse effects on the liberalization of financial services. The article concludes that if WTO Members do not derogate from their GATS obligations and commitments, the stability of the financial system would not be jeopardized, while the prospect of international integration would be increased.

In the wake of the financial crisis considerable momentum has built up behind proposals to extend central counterparty (CCP) clearing in the over-the-counter derivatives markets. However, implementation is proving complex. This paper argues that one cause of this complexity is that the public sector is seeking to incorporate into legislation (and require the wider use of) a privately owned and operated risk management mechanism. As a matter of law, the paper argues that CCP clearing can be understood as a market-generated ‘legal device’; in other words, one designed to support the markets by means of the interaction of various private law techniques. Following this analysis through, the paper highlights the benefits and drawbacks which derive from the legal techniques underlying CCP clearing (standardisation of contracts, asset-backing, netting and so on) and argues that these qualities are inherent to the device. It concludes that the inherent capacity of CCP clearing gives rise to a qualitatively different set of challenges for policymakers to those arising from technical implementation and it explains that both types of problem need to be addressed if the CCP prescription is to be effective.

This article considers the G20 reforms requiring clearing of standardized over-the-counter (OTC) derivatives and the effect of the reforms on covered bonds. Covered bonds routinely use OTC derivatives for hedging purposes. It refers to the text of the proposed European Union Regulation on OTC derivative transactions, central counterparties and trade repositories as an example of detailed legislation. The only other jurisdiction as advanced in its implementation of the reforms is the USA. Any hedging directly by European banks using a standardized derivative will be caught by the requirement to clear. Hedging by European banks using a non-standardized derivative will instead be caught by the requirement to exchange collateral. Covered bonds issued by a non-bank special purpose vehicle may be exempt, within certain parameters.

This article presents several brief news items highlighting legislation and regulation affecting the securities industry and financial institutions in the US.

01 02 The OTC derivatives market has been hit by a massive wave of regulatory change. Capital and margin requirements have increased, trade reporting has been mandated, and execution mechanisms are evolving. Most of all, central clearing is being imposed for many transactions. OTC Derivatives: Bilateral Trading and Central Clearing explains the new rules and the new models. It discusses the traditional bilateral market, then sets out how this will change due to mandatory central clearing and the new ways in which OTC derivatives will have to be traded, reported, and processed. The risks of OTC derivatives clearing houses are discussed in detail, as are the protections that CCPs have against these risks. The book also looks at alternatives to some of the policy decisions that have been made, showing the balance between costs and benefits of various different approaches to derivatives market stability. The book is both a detailed primer on OTC derivatives clearing and a powerful insight into post-crisis financial regulation. Key features of the book include: • A discussion of the capital rules for OTC derivatives counterparty credit risk in Basel III; • An account of OTC derivatives trade processing in both bilateral and cleared markets; • A detailed account of the risk profile of OTC derivatives CCPs; • An explanation of the risks run in various collateral segregation models; and • A comparison of various macro-prudential tools for enhancing the financial stability of OTC derivatives markets. 19 02 David is a respected authority on systemic risk issues surrounding derivatives, and is ideally placed as a former practitioner and ISDA researcher to write this book Derivatives clearing, counterparty credit risk and collateral management are highly topical as practitioners struggle to understand systemic risk in OTC Derivatives and the impact of the changes in the derivatives landscape This will be the first book on the derivatives and repo markets after central clearing has been imposed and that discusses the choices available in designing a system with widespread clearing and their consequences for financial stability 31 02 The first book to shed light on the new clearing and settlement process for OTC Derivatives, illustrating what it is, how it came about and how it could damage the derivatives trading markets 04 02 PART I: UNDERSTANDING BILATERAL RELATIONSHIPS 1. Over-the-Counter Derivatives and Repurchase Agreements 2. Bilateral Relationships 3. Risks in Bilateral Relationships 4. Bilateral Relationships in the Crisis PART II 5. The New Model 6. Relationships in a Trilateral World 7. Risks 8. Design Choices and Financial Stability 9. The Future 13 02 David Murphy is a leading expert in financial stability and regulatory capital. He has been involved in financial regulation and derivatives for over fifteen years, working as a supervisor, risk manager, and most recently as founder of Rivast consulting, a boutique risk management consultancy. He had a front row seat in the post-crisis financial reforms as Head of Risk at ISDA, and hence he is ideally placed to comment on the financial system that is emerging from them. Dr. Murphy has published widely on risk management, OTC derivatives and capital, and is well known for his contributions to financial regulation. 02 02 After the credit crisis, supervisors enacted a range of financial reforms. In particular, they radically changed the nature of the OTC derivatives market via a number of measures, notably mandatory central clearing. This book discusses the market before the crisis, explains what central clearing is, and outlines the consequences of the new rules.

\"The over-the-counter derivatives market has exploded in the last decade -- from $91 trillion in 1998 to $592 trillion in 2008,\" it adds. \"During last year's financial crisis, concerns about the ability of companies to make good on these contracts and the lack of transparency about what risks existed caused credit markets to freeze.\"