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TBGI Working Paper 30

Transnational Business Governance Interactions and Financial Regulation Change: A Case of Asian Financial Markets

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Simin Gao and Christopher Chen

June 2018

Abstract

This chapter examines the interactions of transnational business governance schemes regulating the global derivatives markets with multiple levels of interactions. The chapter describes the process of interactions via the theory of isomorphism. First, after examining the interactions of futures exchanges, we identify that governance techniques among futures exchanges are rather similar, illustrating the forces of mimetic and normative isomorphism. Second, the monopoly of the International Swaps and Derivatives Association (ISDA) scheme in the over-the-counter (OTC) market provides signs of mimetic isomorphism. Third, through imparity of market power and major market dealers, the ISDA scheme became the only governance scheme for the over-the-counter (OTC) market . This shows some signs of coercive isomorphism, though there may also exist a certain degree of divergence of development for certain rules.

Keywords

Derivatives, financial regulations, ISDA, isomorphism, convergence