The law and regulation of OTC derivatives: an Anglo-American comparison and lessons for developing countries

The aim of this article is to examine the threat of systemic risk posed by speculative OTC derivative financing to financial institutions and the efforts made by the regulators to reduce such risk. A critical and comparative analysis of the Anglo-American approach to regulate OTC derivatives is endeavored, in order to evaluate how these advanced economies have proven effective in achieving the ultimate objectives of financial stability, certainty and predictability. The Article examines how the financial regulators of these advanced economies have responded to the vociferous public debate about the threats that OTC derivative financing may have on the overall stability of contemporary financial systems. While the threat is the same, there are substantial differences in regulatory approaches and conclusions. The article concludes by showing how OTC derivatives regulations of advanced economies can be applied to emerging financial markets in order to both increase market efficiency and attain financial stability.