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TBGI Working Paper 17

Private Governance, Public Implications and the Tightrope of Regulatory Reform: The ISDA Credit Derivatives Determinations Committees

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John Biggins and Colin Scott

2013

Abstract

Regulatory relationships in financial markets exemplify the importance and changing nature of transnational business governance interactions (TBGI). These interactions involve reciprocal forces of influence between private and public regulators. This paper examines one key case of private governance in financial markets: the emergence, structures and decision-making of Credit Derivatives Determinations Committees (DCs) of the International Swaps and Derivatives Association (ISDA). The paper highlights the mechanisms or ‘pathways’ of interaction between ISDA, governments, courts and public regulators. Interactions between state and non-state actors are shown to occur in both operational and policy spheres. ISDA is found to be a particularly resilient private regulator in an environment subject both to the significant external shock of the global financial crisis and intense pressure on governmental actors to demonstrate that they are counteracting risk. The reasons behind ISDA’s adaptive capacities are considered.

Keywords

Derivatives, Private Governance, Regulatory Reform