Intensive Course: Contracts and Financial Derivatives Market

Date: 26 of april

Time: 2:00 pm - 4:00 pm

Place: E-301

The course has the objective to discuss the status of the regulation and supervision of the OTC (over-the-counter) derivatives market in the main international markets; particularly, the European Union, United Kingdom, and the United States.

Similarly, the course aims to promote critical analysis, from the regulation based on risk perspective, of the gaps affecting the implementation of reforms following the 2007-2008 Global Financial Crisis.

Also, the book “Regulation and Supervision of the OTC Derivatives Market,” published by Routledge, chosen by BookAuthority as the 2018 third best book on Banking Law and the thirteenth among the 41 best Banking Law books of all time, will be presented. In 2019, the book is still ranked the third best book on Banking Law and included in the16 best books on financial derivatives.

In this second version, the course includes a session devoted to discussing the adoption of disruptive technologies, such as Smart Contracts and the DLT (Distributed Ledger Technology), its implementation, and the early advances and infrastructure changes in the financial derivatives market.

The course will be imparted by Ligia Catherine Arias Barrera, professor-researcher of the Externado Commercial Law Department and PhD in Law from the University of Warwick.

Content

Session 1:

Topic 1. Background and usefulness of OTC markets

* Definitions

* Derivatives market functions. Financing mechanisms. Management and risk administration

* Global Financial Crisis. The true role of financial derivatives contracts as a cause of the spread of systemic risk

* Types of contracts. “Plain Vanilla” and exotic derivatives

Topic 2. Eleven years of regulatory reforms to the derivatives market since the Global Financial Crisis.

* Reforms in the European Union EMIR.

* Reforms in the United Kingdom and the possible “Brexit” impact.

* Reforms in the United States – Dodd-Frank Act.

Session 2: What is the most effective regulation strategy? Risk-based regulation

* “Risk Society” by Beck

* Risk and uncertainty

* Manufactured risks

* Definition and elements of risk-based regulation

* Benefits and limits of the regulation strategy

* Implementation in the United Kingdom

* Implementation in the United States

* Complementary strategies

Session 3: Central Counterparty Clearing House (CCP) regulation of the OTC derivatives market in the European Union and the United Kingdom

* Why should there be a conduct regulation?

* Conduct regulation morphology:

Consumer protection

Competition regime

* Contractual relations between Clearing House and member institutions

* Insolvency regime for Central Counterparty Clearing Houses

* How to regulate innovation risk?

* Innovation to avoid the mandatory use of Central Counterparty Clearing Houses

* Central Counterparty Clearing House government rules. Liability Regime

* Demutualized structure of Central Counterparty Clearing House

* “Adverse effects” of the regulation as a form of innovation

Session 4. Comments on the regulation of the OTC derivatives market in the Dodd-Frank Act. Implementation limits.

PART I.

* General aspects of the derivatives market regulation in the United States

*Dodd-Frank Act

Central Counterparty Clearing Houses

Regulatory Agencies

* Dodd-Frank Act limits in the face of innovation technology. Implementation of “Smart Contracts” and DLT technology

Session 5. Comments on the regulation of the OTC derivatives market in the Dodd-Frank Act. Limits in its implementation.

PART II

* Dual regulatory structure

* Extraterritorial application of the US regulation

* Lack of insolvency regulation for Central Counterparty Clearing Houses

Session 6. Adoption of Smart Contracts in the derivatives market

* Smart Contracts – General concepts

* DLT Definition

* Automatable clauses

* Non-automatable clauses

* ISDA documentation