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Northwestern Pritzker School of Law
Security-based swaps; OTC derivatives; Dodd-Frank; counterparty risk; SEC; margin requirements; collateral requirements
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The Derivative Market’S Black Sheep: Regulation Of Non-Cleared Security-Based Swaps Under Dodd-Frank, Barry Le Vine
The Derivative Market’S Black Sheep: Regulation Of Non-Cleared Security-Based Swaps Under Dodd-Frank, Barry Le Vine
Northwestern Journal of International Law & Business
This paper seeks to comprehensively analyze the SEC's security-based swaps mandate and how it should regulate those non-cleared OTC derivatives within its regulatory ambit to promote market stability, protect counterparties, and reduce the incentives for cross-border regulatory arbitrage which leads to systemic risk creation. It argues that there are many legitimate and compelling reasons for entering into bespoke security-based swap transactions and that imposing collateral and margin requirements would only distort the economics of these trades. It further argues that the SEC should not be in the business of setting margin requirements, which would be an unprecedented move for the …