Meta‐regulation of OTC derivatives contracts post reform

Abstract

PurposeThe purpose of this paper is to examine the probable structure of bilateral derivatives contracts following international regulatory reforms.Design/methodology/approachThe theoretical context of the paper is private and meta‐regulation, which the author applies to a case study and current industry analysis.FindingsWhile regulations are still being written, it is likely that elements of oversight for the bilateral derivatives market will involve enforced self‐regulation. When combined with more specific outcome‐oriented regulatory requirements, the industry is well‐suited to this type of coordinated regulatory regime.Practical implicationsIn light of the uncertainty of derivatives regulation and the future size of the bilateral, over‐the‐counter (OTC) derivatives market, practitioners should consider a likely broader range of regulation structures.Originality/valueThe paper fills a gap in the literature about non‐traditional governance structures for the derivatives markets following the financial crisis. Rather than considering regulation on a light/heavy axis, the paper examines whether this segment of the market can sustain a process‐oriented regulatory arrangement.