Research Handbook on Securities Regulation in the United States

Research Handbook on Securities Regulation in the United States

Research Handbooks in Financial Law series

Edited by Jerry Markham and Rigers Gjyshi

This fascinating Handbook provides a clear explanation of the securities market regulation regime in the United States. A diverse set of contributors offer a comprehensive overview of the regulatory process, Dodd-Frank, the principal securities statutes, and the regulators and market participants involved. In addition to a general summary of the topic, this volume provides detailed explanations of the process for registering securities, exemptions from registration, secondary distributions, and the underwriting process. Scholars and students of financial law, banking and regulatory law will find this book a useful resource, as will attorneys, compliance professionals, risk-mitigation professionals and corporate leaders.

Chapter 11: Regulation of derivative instruments

Jerry W. Markham

Subjects: economics and finance, financial economics and regulation, law - academic, finance and banking law


This chapter will focus on the regulation of derivative instruments by the Commodity Futures Trading Commission (“CFTC”) under the Commodity Exchange Act of 1936 (“CEA”) and the Securities and Exchange Commission (“SEC”) under the federal securities laws. This chapter will describe and define the various derivative instruments that are subject to regulation under those regulatory schemes. This chapter also describes various aspects of the regulation of derivative instruments and compares the regulatory schemes of the CFTC and SEC. The jurisdiction of those two agencies is increasingly overlapping, but their regulatory structures have significant differences in providing customer protection and in the regulation of industry participants. This chapter will further describe amendments to the CEA by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”). The Dodd-Frank Act broadly regulated over-the-counter instruments such as swaps that had previously been unregulated. Dodd-Frank divided regulatory jurisdiction over those instruments between the SEC and CFTC. A derivative contract has been defined as one “whose value depends (or ‘derives’ from) the value of an underlying asset, reference rate, or index.” The most popular derivative contracts are futures, options and swaps, but there are many other forms of derivatives that combine some or all of the elements of those basic derivative instruments. At one point, there were more than 1,200 different financial derivative products being offered to institutional traders.

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