Extraterritoriality of the Regulations and Interconnections of the Derivatives Market: Legal Implications for East and Southeast Asia

Abstract

This article examines the legal implications of the interconnections of the global derivatives market, such as the exchange and over-the-counter (OTC) markets, in East and Southeast Asia. First, we introduce the interconnectedness of the global derivatives market. We then examine some legal implications of such interconnectedness from several angles, such as the extraterritoriality of relevant regulations (notably the reporting, clearing and trading mandates prescribed by the G20 and the new initial margin rule), standard product documentation, the effect of substituted compliance, the potential competition effect due to shifting OTC trades to exchange trading and the effect of consolidating exchanges and/or clearing services. We approach these issues from the perspective of Asian countries in relation to development in core markets, such as those in the US, the UK and Europe.