Securities Law Commons^™

Why The Law Hates Speculators: Regulation And Private Ordering In The Market For Otc Derivatives, Lynn A. Stout

Cornell Law Faculty Publications

A wide variety of statutory and common law doctrines in American law evidence hostility towards speculation. Conventional economic theory, however, generally views speculation as an efficient form of trading that shifts risk to those who can bear it most easily and improves the accuracy of market prices. This Article reconciles the apparent conflict between legal tradition and economic theory by explaining why some forms of speculative trading may be inefficient. It presents a heterogeneous expectations model of speculative trading that offers important insights into antispeculation laws in general, and the ongoing debate concerning over-the-counter (OTC) derivatives in particular.

Although trading …

Derivatives Regulation In The Context Of The Shingle Theory, Allen Madison

Allen Madison

This article discusses the regulation of derivative financial instruments. It notes that the government has neither come to a conclusion as to the necessity of regulation nor which agency would have jurisdiction. It also suggests that one tool that regulators could use as an enforcement tool is the "shingle" theory. Next, it provides history and analysis of this theory. Finally, it examines the current state of affairs regarding regulation of derivatives.