UC Irvine Journal of International, Transnational, and Comparative Law

This paper is about the theory and practice of transnational legal ordering. It seeks to gain insight into how transnational legal orders (TLOs) advance by examining one particular problem: the regulation of over-the-counter (OTC) derivative securities. It focuses on events following the global financial crisis, which exposed the deficiencies of the existing regulatory order in identifying and containing the risks created by trading in those securities. In the aftermath of the crisis, the cross-border systemic risk created by OTC derivatives trading was characterized as a problem of global dimension that necessitated a global response. A wide array of actors and institutions, both domestic and international, mobilized quickly to craft a legislative and regulatory response. Given the catastrophic nature of the crisis, and the general manifestation of political will to address the problem, one might have predicted the successful development and institutionalization of shared norms regulating derivatives trading. That move, however, has been limited.