Ligia Catherine Arias-Barrera - Regulation and Supervision of the OTC Derivatives Market

The over-the-counter (OTC) derivatives market has captured the attention of regulators after the Global Financial Crisis due to the risk it poses to financial stability. Under the post-crisis regulatory reform the concentration of business, and risks, among a few major players is changed by the concentration of a large portion of transactions in the new market infrastructures, the Central Counterparties (CCPs).

This book, for the first time, analyses the regulatory response of the United Kingdom and the United States, the two largest centres of OTC derivatives transactions, and highlights their shortcomings. The book uses a normative risk-based approach to regulation as a methodological lens to analyse the UK regime of CCPs in the OTC derivatives market. It specifically focuses on prudential supervision and conduct of business rules governing OTC derivatives transactions and the move towards enhancing the use of central clearing. The resulting analysis, from a normative risk-based approach, suggests that the UK regime for CCPs does not fulfil what would be expected if a coherent risk-based approach was taken.

Our comments on the Dodd-Frank Act highlight that the incoherent adoption of a risk-based approach to regulation affects the effectiveness of the US regime for CCPs. Such a regime does not follow the pace of events of innovation risk; in particular, the foreseeable changes FinTech will bring to the OTCDM and central clearing services. The second inadequacy of the US regime concerns the dual regulatory structure of the CFTC and the SEC, and the inadequate adoption of different and not well-coordinated regulatory strategies. We also analyse the cross-border implications of the US regime for non-US CCPs that provide clearing services to US market participants. Finally, we study the negative effects of the absence of a clearly defined resolution regime for CCPs.

Ligia Catherine Arias-Barrera holds a Ph.D. in Law from the University of Warwick, and an LL.M in Commercial and Corporate Law from Queen Mary University of London. She is Associate Professor at the School of Law of the Externado de Colombia University, Private Consultant in Financial Law Services in Colombia and the UK, and Research Associate at the Ibero-American Institute for Law and Finance.

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Ligia Catherine Arias-Barrera

For more information about this series, please visit: www.routledge.com/Routledge-Research-in-Finance-and-Banking-Law/book-series/FINANCIALLAW

First published 2018

by Routledge

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2018 Ligia Catherine Arias-Barrera

The right of Ligia Catherine Arias-Barrera to be identified as author of this work has been asserted by her in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988.

All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers.

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British Library Cataloguing-in-Publication Data

A catalogue record for this book is available from the British Library

Library of Congress Cataloging-in-Publication Data

Names: Arias-Barrera, Ligia Catherine, author.

Title: Regulation and supervision of the OTC derivatives market/Ligia Catherine Arias-Barrera.

Description: Abingdon, Oxon; New York, NY: Routledge, 2018. | Series:

Routledge research in finance and banking law | Based on authors thesis (doctoralUniversity of Warwick, 2016) issued under title: Fractures of the UK regulation and supervision of central counterparties in the OTC derivatives market. | Includes bibliographical references and index.

Identifiers: LCCN 2018001657 | ISBN 9781138634787 (hardback)

Subjects: LCSH: Derivative securitiesLaw and legislationGreat Britain. | Over-the-counter marketsLaw and legislationGreat Britain. | Derivative securitiesLaw and legislationUnited States. | Over-the-counter marketsLaw and legislationUnited States.

Classification: LCC KD1777.D47 A75 2018 | DDC 346.41/0922dc23

LC record available at https://lccn.loc.gov/2018001657

ISBN: 978-1-138-63478-7 (hbk)

ISBN: 978-1-315-20666-0 (ebk)

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This work is dedicated to my family, thank you for your support and encouragement

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