Derivatives Chapter 9

Question 1

2 Approaches to Regulation

& give some info

Answer 1

Rules-based

• strikt, clearly defined but inflexible
• ‘one size fits all’ (but it doesnt:/)

Principles-based

• broad-based standards in preference to detailed rules (more flexible!)
• outcome-based regulation
• increasing senior management responsibility
• chosen in the UK!

Question 2

Differences between US and UK Regulations

Answer 2

UK & EU

• MiFID - Have single authorisation: ‘PASSPORT’ (e.g. if you are a UK firm and you want to open branch derivatives in another EEA state, you first go to your home state and get authorisation. That single authorisation is valid throughout Europe. When you start your branch though, you are governed by the home state’s CoBS).
• Transparency Directive