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Capital Markets Law Journal Advance Access originally published online on June 27, 2007
Capital Markets Law Journal 2007 2(3):245-259; doi:10.1093/cmlj/kmm016
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© The Author (2007). Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org

Legal clarity and regulatory discretion—exploring the law and economics of insider trading in derivatives markets

Sharon Brown-Hruska and Robert S. Zwirb*
* Sharon Brown-Hruska, Vice President, NERA Economic Consulting and Robert S. Zwirb, Senior Attorney, Cadwalader, Wickersham & Taft, LLC.

The first 150 words of the full text of this article appear below.


Key points

  • Unspecified boundaries in the commodities, derivatives, and securities law have not only increased the discretion of individual regulatory authorities, but have also resulted in expanded and often overlapping assertions of jurisdiction by the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Federal Energy Regulatory Commission, and other authorities.
  • The Securities and Exchange Commission has recently sought to expand its jurisdiction into the derivatives markets to seek registration of hedge funds and other users of derivatives and commodity futures as investment advisors, and to seek to apply its insider trading laws broadly to the various assets traded by funds.
  • Financial institutions, intermediaries, and end users are increasingly being asked to demonstrate the economic or business purpose of their financial transactions and their trading practices to ensure their legitimacy and avoid regulatory scrutiny.
  • Compliance and litigation costs have predictably risen in this environment, in part due to the . . . [Full Text of this Article]

 

   1. Introduction
 

   2. Law and economics context
 

   3. Hedge fund regulation
 

   4. Concerns about insider trading
 

   5. The importance of cost benefit in regulation
 

   6. Insider trading undefined
 
If you build it, they will come

   7. Differences between derivative assets and securities
 

   8. Uncertainty should be resolved in the markets, not in litigation
 

   9. ETFs and structured products are also blurring the regulatory boundaries
 
The burden is on market participants

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Capital Markets Law Journal 2007 2: 243-244. [Extract] [Full Text]