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The Politics of Derivatives Regulation

After the 2008 Crisis Eric Helleiner
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Governing the World’s Biggest Market
Governing the World’s
Biggest Market
The Politics of Derivatives Regulation
after the 2008 Crisis
EDITED BY
ERIC HELLEINER
S T E FA N O PA G L I A R I
I R E N E S PA G N A
1
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Printed by Sheridan Books, Inc., United States of America
CONTENTS
List of Illustrations vii

List of Tables ix
Preface xi
Abbreviations xiii
Contributors xvii
Introduction—Governing the World’s Biggest Market: The Politics

of Derivatives Regulation after the 2008 Crisis 1
E r i c H e l l e i n e r , S t e fa n o Pa g l i a r i , a n d I r e n e S pa g n a
1. Becoming the World’s Biggest Market: OTC Derivatives before

the Global Financial Crisis of 2008 27
I r e n e S pa g n a
2. Financial Regulatory Cooperation: Coordination of

Derivatives Markets 54
Elliot Posner
3. Global Markets, National Toolkits: Extraterritorial Derivatives

Rule-Making in Response to the Global Financial Crisis 82
M at t h e w G r av e l l e a n d S t e fa n o Pa g l i a r i
4. Power Plays from the Fringe: East Asian Responses to Derivatives

Regulatory Reform 107
Y u -wa i V i c L i
v
vi Contents
5. The Second Half: Interest Group Conflicts and Coalitions

in the Implementation of the Dodd-Frank Act Derivatives Rules 137
S t e fa n o Pa g l i a r i
6. The Politics and Practices of Central Clearing in OTC

Derivatives Markets 168
Erin Lockwood
7. Positioning for Stronger Limits? The Politics of Regulating

Commodity Derivatives Markets 199
Eric Helleiner
8. A Web without a Center: Fragmentation in the OTC Derivatives

Trade Reporting System 226
Peter Knaack
Index 257
I L L U S T R AT I O N S
1.1 The global OTC derivatives market 31

1.2 The markets for OTC and exchange-traded derivatives 31
1.3 The global OTC derivatives market by counterparty type
(% of notional amounts outstanding) 32
1.4 Gross market value of OTC derivatives in function of different types
of derivative instruments (billion USD) 33
5.1 Firms lobbying CFTC and SEC over derivatives rules
(2010–2014) 147
5.2 Groups most frequently lobbying (meetings + letters) the CFTC
and SEC over implementation of derivatives rules (2010–2014) 148
5.3 Network of groups lobbying over SEC and CFTC
derivatives rules 149
5.4 Numbers and links among groups lobbying the CFTC and SEC
(meetings + letters) across different derivatives rule-making
(2010–2014) 151
6.1 Bilateral and centrally cleared networks 187
6.2 Links between banks and global CCPs 188
8.1 International financial network, portfolio assets 233
8.2 CDS network on EU sovereign reference entities 235
8.3 ISDA’s role in the agreement on a temporary stay on early
termination rights 238
8.4 The current global TR network 248
vii
TA B L E S
I.1 Core aspects of the G20 agenda for derivatives regulatory reform 6
I.2 The political dynamics of post-2008 derivatives regulation 22
2.1 What is to be explained? Patterns of cooperation in implementing
G20 principles for derivatives regulation 61
ix
P R E FA C E
Since the 2008 global financial crisis, scholars have written extensively about
various post-crisis regulatory reforms designed to improve the stability and
resilience of financial markets. Within this literature, however, the extensive
efforts to reform the regulation of derivatives markets have received less atten-
tion than other dimensions of the post-2008 reform agenda. This relative neglect
is unusual given the significance of derivatives markets in the crisis and in the
contemporary global economy more generally. We think it is also unfortunate
given the fascinating nature of the politics surrounding post-2008 derivatives
regulatory reforms. As the momentum for reforming the regulation of these
enormous markets weakens, we believe that it is more important than ever to
improve understandings of the politics of derivatives regulation. This volume
aims to contribute to that task.
The book is a product of a very fruitful collaboration among the con-
tributors to this volume that began with a workshop at the Balsillie School of
International Affairs in September 2015. We are extremely grateful to all the
authors in this volume for writing such interesting chapters. For their contri-
butions to that initial workshop and very helpful comments, we also extend
enormous thanks to Derek Hall, Dave Kempthorne, Jonathan Kirshner, Kate
McNamara, Sylvia Maxfield, and Heather Whiteside. We also thank the Balsillie
School of International Affairs for funding the workshop and the Social Sciences
and Humanities Research Council of Canada for research support. Many thanks
as well to Dave McBride at Oxford for his support of this project as well as to
Claire Sibley for her help and the anonymous reviewers of the initial draft of this
manuscript for their very useful suggestions and comments.
Eric Helleiner, Stefano Pagliari, and Irene Spagna
April 2017
xi
A B B R E V I AT I O N S
AFC Asian Financial Crisis

AFL-CIO American Federation of Labor and Congress of Industrial
Organizations
AIG American International Group
ANE arranged, negotiated, or executed
ASIFMA Asian Securities Industry and Financial Market Association
ASX Australian Securities Exchange
BCBS Basel Committee on Banking Supervision
BIS Bank for International Settlements
BRICS Brazil, Russia, India, China, and South Africa
CCP central counterparty
CDO collateralized debt obligation
CDS credit default swap
CEA Commodity Exchange Act
CEO Chief Executive Officer
CFMA Commodity Futures Modernization Act
CFTC Commodity Futures Trading Commission
CGFS Committee on the Global Financial System
CMC Commodity Markets Council
CME Chicago Mercantile Exchange
CMOC Commodity Markets Oversight Coalition
COU Central Operating Unit
CPMI Committee on Payments and Market Infrastructures
CPSS Committee on Payment and Settlement Systems
CRMPG Counterparty Risk Management Policy Group
CVA credit valuation adjustment
DCO derivatives clearing organization
xiii
xiv Abbreviations
Dodd-Frank Dodd-Frank Wall Street Reform and Consumer

Protection Act
DTCC Depository Trust & Clearing Corporation
EMIR European Market Infrastructure Regulation
ESMA European Securities and Markets Authority
ETP electronic trading platform
FBOT Foreign Board of Trade
FRB Federal Reserve Board
FSB Financial Stability Board
FX foreign exchange
G14 largest fourteen derivatives dealers
G16 largest sixteen derivatives dealers
G20 Group of Twenty
G30 Group of Thirty
GDP gross domestic product
G-SIB global systemically important bank
HKEX Hong Kong Exchange
HKMA Hong Kong Monetary Authority
IATP Institute for Agriculture and Trade Policy
ICE Intercontinental Exchange
IIF Institute of International Finance
IMF International Monetary Fund
IOSCO International Organization of Securities Commissions
IPE international political economy
IRS interest rate swap
ISDA International Swaps and Derivatives Association
JFSA Japanese Financial Service Authority
JSCC Japan Securities Clearing Corporation
LCH London Clearinghouse
LEI legal entity identifier
LTCM Long Term Capital Management
MAS Monetary Authority of Singapore
MBS mortgage-backed security
MiFID II Revision of the Market in Financial Instruments Directive
MoU Memorandum of Understanding
MTF multilateral trading facility
NDF non-deliverable forward
NGO nongovernmental organization
NYMEX New York Mercantile Exchange
OCC Office of the Comptroller of the Currency
ODRF OTC Derivatives Regulators’ Forum
Abbreviations xv
ODRG OTC Derivatives Regulators Group

ODWG OTC Derivatives Working Group
OFR Office for Financial Research
OTC over-the-counter
PFMI Principles for Financial Market Infrastructures
RCAP Regulatory Consistency Assessment Program
SDMA Swaps and Derivatives Market Association
SEC Securities and Exchange Commission
SEF swap execution facility
SFC Securities and Futures Commission
SGX Singapore Exchange
SIFMA Securities Industry and Financial Markets Association
SOMO Stichting Onderzoek Multinationale Ondernemingen
(Centre for Research on Multinational Corporations)
SPV special purpose vehicle
SSB standard-setting body
TARP Troubled Asset Relief Program
TR trade repository
UCC Uniform Code Council
UTI unique trade identifier
VaR value-at-risk
WDM World Development Movement
WEED World Economy, Ecology and Development
WMBAA Wholesale Markets Brokers Association of America
CO N T R I B U TO R S
Matthew Gravelle recently completed his PhD in Political Science at the

University of British Columbia in Vancouver, Canada.
Eric Helleiner is a Professor in the Department of Political Science and Balsillie
School of International Affairs, University of Waterloo, Ontario, Canada.
Peter Knaack is a postdoctoral research fellow at the Blavatnik School of
Government, University of Oxford.
Yu-wai Vic Li is an Assistant Professor in the Department of Social Sciences at
the Education University of Hong Kong.
Erin Lockwood is an Assistant Professor in the Department of Political Science
at the University of California, Irvine.
Stefano Pagliari is a Senior Lecturer in the Department of International Politics
at City University of London.
Elliot Posner is an Associate Professor of Political Science at Case Western
Reserve University, Cleveland, Ohio.
Irene Spagna is a PhD candidate in Global Governance/Global Political
Economy at the University of Waterloo, Ontario, Canada.
xvii
Governing the World’s Biggest Market
Introduction
Governing the World’s

Biggest Market
The Politics of Derivatives Regulation after the 2008 Crisis
Eric Helleiner , Stefano Pagliari, and Irene Spagna
This book examines the politics of derivatives regulation after the 2008 global
financial crisis. At the time of the crisis, derivatives had come to occupy a central
position in the global economy. By the end of 2008, the notional value of out-
standing over-the-counter (OTC) derivatives contracts totaled USD 684 tril-
lion, a staggeringly large figure that was approximately ten times the global gross
domestic product (GDP).1 Taken together, derivatives had in fact grown to be
the world’s biggest market. This market involved participants from across the
globe ranging from large banks and pension funds to farmers and manufacturers,
from governments and municipalities to international financial institutions and
sovereign wealth funds.
The 2008 financial crisis revealed very starkly that derivatives mattered not
just to these groups participating in this huge market. The trading of these
financial products—which include forwards, futures, options, or swaps—was
also enormously significant to everyone else in the world. Before the crisis, star
investor Warren Buffett had warned in 2002 that “derivatives are financial weap-
ons of mass destruction, carrying dangers that, while now latent, are potentially
lethal.”2 This warning proved prescient when derivatives contributed in signifi-
cant ways to the severity of the 2008 meltdown.
1
OTC figures from Bank for International Settlements 2010: 6. OTC derivatives represented
about 90% of all global derivatives at the time.
2
Buffett 2002: 15.
1
2 Eric Helleiner , Stefano Pagliari, & Irene Spagna
In the wake of the crisis, policymakers in the G20 jurisdictions committed to

reform the regulation of derivatives markets.3 The regulation of derivatives was a
topic that had previously not attracted much sustained public attention, despite
the extremely rapid growth of the markets since the early 1980s. A few corpo-
rate scandals (e.g., Enron, Orange County) and episodes of financial instability
involving derivatives (e.g., Long Term Capital Management) in the 1990s had
briefly brought derivatives onto the agenda of regulators and scholars, but these
episodes proved to be short-lived and failed to alter significantly the regulation
of these markets.4 The situation changed with the financial crisis of 2008, as the
regulation of derivatives markets now assumed center stage on the international
public policy agenda and not just because of concerns about systemic financial
instability. Critics argued that inadequate regulation of derivatives also contrib-
uted to commodity price volatility, sovereign and corporate debt problems, mar-
ket abuse, and, more generally, the growing and unchecked influence of private
financial interests. In short, derivatives markets were suddenly at the middle of
core political debates about the distribution of power and wealth in the modern
world economy.
What have been the precise goals of the G20 reform agenda? What have been
the results of efforts to implement this agenda to date? More generally, what
does this episode teach us about the politics of derivatives regulation after the
global financial crisis? Despite the global importance of derivatives markets,
these questions have not received much attention to date from those interested
in the politics of the global economy. Even among those who specialize in the
study of the politics of global financial regulation, other topics such as banking
rules receive much more attention than the governance of derivatives. For many
scholars and students of global political economy, derivatives markets remain
mysterious and complex.
This volume is designed to begin to rectify this relative neglect. The first chap-
ter by Irene Spagna provides some background for readers with less knowledge
of derivatives by describing and analyzing the dramatic growth of pre-crisis
derivatives and their contribution to the 2008 crisis. The rest of the chapters
then address the questions we have raised by analyzing various aspects of the
politics of post-2008 derivatives regulation. Some of these chapters focus on
the dynamics of international regulatory coordination between leading powers,
while others examine reforms in specific geographical contexts or with respect to
specific issue areas. Despite these different foci, some common themes emerge
The G20 jurisdictions are: Argentina, Australia, Brazil, Canada, China, European Union,
3
France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South
Korea, Turkey, United Kingdom, and United States.
4
Tsingou 2006.
Int roduc tion 3
in addressing the three core questions. The purpose of this introductory chapter
is to summarize these themes.
What Have Been the Goals of the G20

Regulatory Agenda?
The first theme concerns the content of the G20-led reform objectives them-
selves. As Irene Spagna explains in chapter 1, policymakers in the United
States and other leading financial powers such as the United Kingdom had
allowed derivatives to grow largely unchecked in the years leading up to the
crisis, particularly OTC derivatives that are traded bilaterally and privately
away from organized exchanges. They had done this not just through vari-
ous liberalizing and permissive rules but also through their support for self-
regulatory initiatives of market actors and private industry bodies such as the
International Swaps and Derivatives Association (ISDA). The 2008 crisis
ushered in an important change in official attitudes whose dimensions this
volume explores.
The shift in attitudes was already apparent when the G20 leaders met for the
first time in November 2008 to endorse a new international agenda for financial
regulatory reform. In their final statement, the G20 leaders called for “a review of
the scope of financial regulation, with a special emphasis on institutions, instru-
ments, and markets that are currently unregulated” and OTC derivatives were
specifically identified as a priority area.5 By the time of their third summit in
September 2009 in Pittsburgh, the G20 leaders had settled on a new compre-
hensive set of regulatory goals for derivatives markets that they each agreed to
implement.6
To begin with, the G20 leaders committed to force all standardized OTC
derivatives contracts to be cleared by central counterparties (CCPs) by the end
of 2012. CCPs are designed to act as an intermediary between sellers and buyers
of derivatives, guaranteeing trades should either party default, and forcing both
parties to post margin or collateral to cover potential losses. Officials argued that
CCPs would reduce systemic risks by minimizing uncertainty in the markets and
by enabling counterparty risks to be managed centrally and to be better super-
vised and regulated. CCPs were already used in some segments of the industry
and the G20 leaders now committed to extend this practice for all standardized
derivatives contracts on a mandatory basis.
G20 2008.
5
G20 2009.
6
The G20 leaders also declared that derivative contracts not centrally cleared
should be subject to higher capital requirements, a move that both incentivized
central clearing and mitigated the risks associated with non-standardized con-
tracts that continued to be cleared bilaterally. In addition, they decided in 2011
to create common global standards for initial and variation margins for non-
centrally cleared contracts in order to ensure that collateral was available to cush-
ion the impact of defaults and to help address “de-stabilizing pro-cyclicality” that
resulted from the tendency of market actors to lower margins in boom times and
raise them in crises.7 These standards were then announced in 2013.8
Equally important, they committed to ensure that CCPs be subject to effective
regulation and supervision—a particularly important aim given that derivatives-
related counterparty risks would now become increasingly concentrated in
CCPs. International financial standard-setting bodies subsequently developed
standards for CCPs that addressed issues such as prudential requirements, mar-
ket access rules, measures to protect customer positions and assets, governance
arrangements, information disclosure, as well as resolution and recovery.9
Another goal outlined by the G20 leaders in September 2009 was that, by
the end of 2012, “all standardised OTC derivative contracts should be traded
on exchanges or electronic trading platforms, where appropriate.”10 By bring-
ing bilateral OTC trades onto these organized trading platforms, policymakers
sought to make them more transparent not just to regulators but also to other
market participants. Greater transparency would help reduce the asymmet-
ric control of information by the dealer banks that dominated these markets
through their unique knowledge of trading prices and volumes. The markets
would, it was hoped, thus become less prone to what the G20 called “market
abuse” and would function more smoothly, particularly in times of stress.11
Another major objective outlined by the G20 leaders in September 2009 was
that all OTC contracts—both cleared and non-cleared—should be reported to
“trade repositories” (TRs). TRs serve as centralized registries collecting and
maintaining records about who has traded what and with whom. One TR had
already emerged before the crisis to reduce confirmation backlogs for credit
default swaps (CDSs), a product whose purchasers pay a fee every quarter to
the seller in return for a promise that the full value of an underlying bond will be
repaid in the event of a default. Because CDSs ended up at the center of the 2008
crisis (for reasons explained in the next chapter), this TR was able to help calm
7
BCBS and IOSCO 2012: 2; see also G20 2011.
8
BCBS and IOSCO 2013.
9
CPSS and IOSCO 2012; IOSCO and CPMI 2014.
10
G20 2009.
11
Quote from G20 2009: 9. See also Financial Stability Board 2010: 10.
Int roduc tion 5
fears during the Lehman crisis by publicizing how the size of net CDS expo-
sure was smaller than many expected at the time. By forcing all OTC derivatives
contracts to be reported to TRs, the G20 leaders hoped to give market actors
greater information, and regulators and supervisors a more complete picture of
risk exposures across all markets.12 International regulatory bodies subsequently
also developed standards for TRs that cover similar issues as those for CCPs and
seek to ensure that regulatory authorities gain access to TR data and that global
aggregation mechanisms are established.13
Alongside those various goals, the G20 leaders also announced one final
objective in late 2011 that applied more specifically to commodity derivatives
markets. During the financial crisis of 2008, commodity prices spiked dramat-
ically in ways that contributed further to the global economic instability at the
time. As Eric Helleiner details in his chapter, this experience and another set of
price spikes in 2010‒11 generated much concern about whether growing spec-
ulative trading in commodity derivatives markets was contributing to commod-
ity price volatility. Responding to this concern, the G20 leaders declared in late
2011 that regulators of commodity derivatives markets “should have, and use
formal position management powers, including the power to set ex-ante posi-
tion limits.”14 Many countries already had in place “position management pow-
ers”—such as position limits that set ceilings on the number of contracts each
trader could hold in specific markets—but this statement signaled a new inter-
national endorsement and encouragement of their use.
Taken together, these core goals outlined by the G20 leaders (and summa-
rized in table I.1) were heralded as a historic departure from the pre-crisis regu-
latory paradigm. They did indeed signal a new willingness to strengthen public
regulation and supervision of global derivatives markets. At the same time, this
volume argues that it is important not to overstate the degree of change from
pre-crisis norms that is embodied in the G20 reform agenda.
The Limits of Change

One reason to be cautious is that the G20 leaders continued to assign profit-
seeking private actors a prominent place in the governance of derivative markets.
Many of the institutions placed at the center of the reforms—CCPs, exchanges,
and TRs—were of this kind. In the important case of CCPs, the Bank of England
initially warned against this strategy, arguing that a nonprofit, user-owned gov-
ernance structure would be optimal because these institutions were now being
12
Helleiner 2014b.
13
CPSS and IOSCO 2012, 2013.
14
G20 2011.
Table I.1 Core aspects of the G20 agenda for derivatives regulatory reform
Issue Requirements
Central clearing • All standardized OTC derivatives should be cleared

via CCPs
• Non-cleared contracts subject to margin requirements and
higher capital requirements
• CCPs subject to effective regulation and supervision,
including recovery and resolution plans
Trading • All standardized OTC derivatives should be traded on
exchanges or electronic trading platforms
Reporting • All OTC derivatives controls should be reported to TRs
• All TRs should meet international standards
Position limits • Regulators of commodity derivatives markets should have,
and use formal position management powers, including the
power to set ex-ante position limits
set up to play a key role in restraining risky behavior in the market. But this idea
gained little political traction.15 As Erin Lockwood’s chapter in this volume
shows, many CCPs replicate key practices and techniques of risk-management
that had failed in the OTC markets before the crisis.16 The dangers of poor risk
management at CCPs were only compounded by the fact that the content of the
G20 reform agenda had the effect of encouraging an intense competitive strug-
gle among various private sector groups trying to capture the new mandatory
clearing business.
G20 policymakers also delegated key aspects of the post-crisis rule-making
and implementation process to the same private groups that orchestrated self-
regulation before the crisis. For example, public authorities worked closely with
ISDA and the leading dealer banks (“the G14” and more recently the “G16”) in
order to encourage greater transparency, central clearing, and contract standard-
ization.17 ISDA also played the lead role in areas such as the design of contractual
models for CDS eligible for CCP clearing, and the solicitation and adjudica-
tion of private sector proposals for the introduction of new TRs for commodity,
15
Bank of England 2010: 10.
16
See also Lockwood (2015) for the enduring role of banks’ value-at-risk models as an “author-
itative practice” with “productive power” in the context of broader post-2008 regulatory reforms.
17
Financial Stability Board 2011; Biggins and Scott 2012. The G14 included: Bank of America,
Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan
Chase, Morgan Stanley, Royal Bank of Scotland, Société Générale, UBS, and Wells Fargo. The follow-
ing two were added to make up the G16: Crédit Agricole and Nomura.
Int roduc tion 7
interest rate, and equity derivatives.18 In addition, as the chapter by Matthew

Gravelle and Stefano Pagliari notes, ISDA has been at the center of industry-led
initiatives designed to assist the implementation of the G20 agenda by promot-
ing mutual recognition of domestic regulatory frameworks.
In instances such as these, ISDA’s role has shifted to complementing, rather
than substituting for or preempting, public regulatory initiatives, but its central
place within the governance of these markets persists.19 Indeed, some ISDA ini-
tiatives have even given it a more prominent role. For example, John Biggins and
Colin Scott have made this case in the context of their 2013 analysis of ISDA’s
creation of a set of new 15-member ISDA Determinations Committees (com-
posed of 10 CDS dealers and 5 non-dealers). These Committees define the
“credit events” that will trigger payment in a credit default swap and their deci-
sions can be extremely important because the Committee’s decisions are legally
binding under ISDA contracts. In March 2012, for example, the decision about
whether a Greek quasi-voluntary debt restructuring deal was to be considered a
“credit event” impacted the evolution of debt crisis in the Eurozone.20
More generally, the G20 leaders have also refused to endorse many reforms
that would have aimed more squarely at constraining the size and speculative
features of the markets. For example, while the G20 endorsed position limits in
commodity derivatives markets, they refrained from backing this kind of con-
straint on speculative trading vis-à-vis other asset classes that are vastly larger
in size and volume. They also ignored calls for bans on derivatives products that
were particularly associated with destabilizing speculative trading such as “unat-
tached” (or “naked”) CDS contracts in which the purchaser does not hold the
underlying bond to which the contact is linked. In the words of New York insur-
ance superintendent Eric Dinallo, these products were the equivalent of “taking
out insurance on your neighbor’s house and maybe hoping it blows up.”21 Yet the
G20 backed no efforts to ban, or even license, these products. Only in the more
limited European regional context did authorities—provoked by speculation
against Greek sovereign debt in 2010—undertake a limited initiative to regulate
unattached CDS on European sovereign bonds.22
18
Saguato 2013; CPSS and IOSCO 2012: 6.
19
McKeen-Edwards and Porter 2013: 57–58.
20
Biggins and Scott 2013.
21
Quoted in Helleiner 2011: 138.
22
Pagliari 2013b. The idea of licensing derivatives had been raised by the BIS (2009), which
suggested that all new financial products be registered and evaluated on an ongoing basis by a con-
sumer financial products regulator because of their respective potential to contribute to systemic risk.
A precedent for banning derivatives products on public policy grounds in the United States came
from Congress’s rejection of a Pentagon proposal for the introduction of terrorism futures in 2003 (as
a market-based predictor of likelihood of terrorist attacks) (Omarova 2013: 105n30).
Similarly, at the height of the crisis, some reformers called for all OTC con-
tracts to be centrally cleared and traded on exchanges, a move that would have
significantly curtailed the size, complexity, and speculative features of these mar-
kets. But the G20 limited requirements for central clearing and exchange trading
to “standardized” contracts, leaving out more complex “bespoke” transactions.
With this provision, officials estimate that as much as one-quarter of interest rate
swaps, one-third of CDS, and two-thirds of other OTC derivatives will remain
uncleared.23
Summing up, while the G20 leaders endorsed strengthened public regulation
and supervision of the markets, their overall reform agenda did not seek to turn
back the clock by radically reducing the size and importance of global deriva-
tives markets or by reimposing the kind of tight public controls over financial
markets that existed in many countries in the early postwar years. Instead of try-
ing to constrain market growth and speculative activity in significant ways, the
main goal was a more modest one of enhancing the transparency and resiliency
of the markets. This more “market-friendly” objective was reinforced by the fact
that the G20 continued to rely on profit-seeking private actors and private rule-
making to play important roles in the governance of the markets, as had been
done in the pre-crisis period. As Duncan Wigan has suggested, post-crisis regu-
latory initiatives appear much more as efforts to “improve the operations of the
system” than ones designed to challenge it.24
What Have Been the Results of Efforts

to Implement the G20 Agenda to Date?
The forging of the G20 reform agenda was just the first phase in the process of
regulatory change in the global derivatives sector after the crisis. Equally impor-
tant have been the subsequent efforts to implement that agenda. Many of the
chapters in this volume analyze the politics of the implementation phase. Taken
together, they reveal how implementation has been associated with a number of
unanticipated outcomes.
Delays and Inconsistencies

The first of these has been the slow nature of implementation. The institution at
the center of coordinating the implementation has been the Financial Stability
23
BCBS and IOSCO 2012: 2n4.
24
Wigan 2010: 122. See also Wigan 2009.
Int roduc tion 9
Board (FSB), a body created in 2009 by the G20 with membership that includes
all G20 countries and a few others.25 Its regular updates have highlighted the fail-
ure of its members to meet deadlines initially set by the G20 leaders. The G20
leaders set a very clear deadline at their September 2009 summit that “all stan-
dardized OTC derivative contracts should be traded on exchanges or electronic
trading platforms, where appropriate, and cleared through central counterpar-
ties by end-2012 at the latest.”26 In April 2013, however, the FSB acknowledged
that “no jurisdiction had fully implemented requirements by end-2012” and only
“less than half of the FSB member jurisdictions currently have legislative and
regulatory frameworks in place to implement the G20 commitments.”27 Since
then, more countries have taken steps toward implementing the G20 agenda,
but in 2016 the FSB continued to lament that progress in the implementation of
OTC derivatives reforms “remains uneven.”28
Delays have even characterized the domestic reforms in the two major
jurisdictions—the United States and the European Union—at the center of
driving the international regulatory agenda.29 The G20 reform agenda was sig-
nificantly influenced by regulatory goals outlined by the Obama administration
in May 2009. The United States was also the first major jurisdiction to develop
comprehensive legislation strengthening derivatives regulation with the passage
of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-
Frank) in July 2010. As a number of the chapters in this volume describe, how-
ever, since the passage of the Dodd-Frank, the details of its implementation
have been unexpectedly delayed and continue to be rolled out slowly by the
two domestic regulators allocated strengthened authority to oversee and reg-
ulate derivatives: the Commodity Futures Trading Commission (CFTC) and
the Securities and Exchange Commission (SEC). The election in November
2016 of President Donald Trump and his pledge to roll-back many aspects of
the Dodd-Frank have further called into question the prospects for the imple-
mentation of these commitments.
In Europe, the European Commission presented its first Communication
outlining possible derivatives regulatory reforms in July 2009, shortly after the
Obama administration announced its goals in May. Following approval by the
European Parliament and the major European member countries, the European
Market Infrastructure Regulation (EMIR) came into force in August 2012 as
a new EU-wide regulatory framework for OTC derivatives that followed many
25
For an overview, see Helleiner 2014c: ch. 5.
26
G20 2009.
27
Financial Stability Board 2013: 1.
28
Financial Stability Board 2016a: 1.
29
Knaack 2015.
of the G20 goals. Other relevant initiatives of the European Commission have
included: a revision of its Capital Requirements Directive in order to intro-
duce differentiated capital charges between CCP cleared and non-CCP cleared
contracts, and a revision of its Market Abuse Directive to increase the power
of regulatory authorities to investigate market abuses in derivatives markets,
and regulations of short-selling that cover the use of credit default swaps. But
as some chapters in this volume note, progress has been slow in areas such as
the execution of OTC derivatives on electronic platforms, post-trade transpar-
ency, and position limits for commodity derivatives that were included in the
revision of the Market in Financial Instruments Directive (MiFID II), which
was adopted by the European Parliament and European Council in 2014 but
whose details then had to be developed by the European Securities and Markets
Authority (ESMA).
Other jurisdictions, such as Japan, have also undertaken legislative initia-
tives to implement G20 commitments, but others have delayed action in vari-
ous areas. In particular, while the regulatory frameworks for central clearing and
trade reporting have been implemented in most jurisdictions, the drafting of
guidelines related to resolution frameworks for CCPs by international standard-
setting bodies has been lagging behind. As a result, the FSB noted in 2016 that
a number of CCPs still lacked the adequate safeguards to ensure that they main-
tained sufficient financial resources and procedures needed to facilitate their
resolution in the case of a crisis.30 The FSB also noted in 2016 that “platform
trading frameworks are relatively undeveloped in most jurisdictions”31, with
only “less than half of FSB member jurisdictions” having in place comprehen-
sive criteria to achieve this objective.32 Along the same lines, the FSB high-
lighted that only 3 of 24 member jurisdictions were on track to have variation
and initial margin requirements for non-centrally cleared derivatives in force
from September 2016 in accordance with the schedule set by the International
Organization of Securities Commissions (IOSCO) and Basel Committee on
Banking Supervision (BCBS).33
Even where implementation was more widespread such as in the area of trade
reporting that is analyzed in Peter Knaack’s chapter, the FSB highlighted incon-
sistencies. Although all but five FSB jurisdictions had trade reporting require-
ments in place covering over 90% of OTC derivatives transactions in their
jurisdictions by mid-2016,34 the FSB noted that different implementation issues
30
Financial Stability Board 2016b: 31.
31
32
33
34
Int roduc tion 11
continued to influence the effectiveness of trade reporting requirements, includ-

ing “difficulties with TR data quality, challenges in aggregating data across TRs,
and legal barriers to reporting complete data to TRs and to authorities’ access
to TR-held data.”35
Differences have also emerged between major jurisdictions at the stage of
implementation with respect to issues such as: requirements for mandatory
clearing, the scope of the exemptions offered to specific market players and
types of derivatives from the clearing and trading requirements, segregation and
portability requirements, CCP ownership and governance requirements, defini-
tions of organized trading platforms, and details of position limits.36 In some
cases, differences that existed in primary legislation have been reconciled during
the implementation stage, but the latter has also been an occasion to introduce
new divergences across jurisdictions. These divergences often reflected changes
that dilute in various ways the goals of the initial G20 agenda.
Conflict and Fragmentation

In addition to the delayed and inconsistent nature of implementation across
jurisdictions, another unexpected outcome has been the degree of conflict and
regulatory fragmentation that has emerged between jurisdictions. The negoti-
ation of the initial G20 reform agenda was a remarkably cooperative process
that held out the prospect of the emergence of common global rules govern-
ing globally integrated markets. In the end, however, the implementation of
the same agenda has been characterized by much disagreement and regulatory
fragmentation.
Disagreements have been generated not just by the divergent pace and con-
tent of implementation across jurisdictions but also by issues relating to the
jurisdictional scope of the rules being introduced—an issue explored in a num-
ber of the chapters in this volume. For example, Dodd-Frank contains explicit
references to the extraterritorial application of many of its rules to foreign enti-
ties, which, according to one analyst, “have seldom, if ever, been seen before in
U.S. financial regulation.”37 These provisions have been justified by US authori-
ties on the grounds that American taxpayers were asked to bail out American
International Group (AIG) whose troubles stemmed largely from swaps writ-
ten by its UK subsidiary.38 But they have generated controversy abroad, par-
ticularly in East Asia, as Yu-wai Vic Li’s chapter describes. EMIR also contains
35
Financial Stability Board 2016b: 9-10.
36
CFTC and SEC 2012.
37
Coffee 2014: 29.
38
Coffee 2014; Helleiner 2014a; Greene and Potiha 2013.
extraterritorial provisions regulating trades between non-EU entities when

these have a “direct, substantial and foreseeable effect” within the European
Union or when this is necessary to guard against evasion of the rules.39
As Gravelle and Pagliari’s chapter explains, both the United States and
European Union included legislative provisions enabling the extraterritorial
application of their respective laws to be waived if a foreign jurisdiction intro-
duced domestic laws that were equivalent to their own. But they also highlight
how the determination of equivalency has generated substantial tension, first
and foremost in the US‒EU relationship itself. Since 2008, US and European
policymakers have devoted considerable time to the task of trying to resolve
potential transatlantic conflicts in this area. As Elliot Posner’s chapter analyzes,
the negotiations between US and European authorities to develop a collabora-
tive framework to defer to each other’s rules have been fraught with difficulties.
The FSB has identified the persistence of this disagreement between the United
States and European Union as a stumbling block negatively affecting the consist-
ent implementation of the G20 agenda in a number of smaller markets.40
Jurisdictional issues have equally arisen around the implementation of the
G20 goals of promoting central clearing. For example, rather than rely on US-
based CCPs, European authorities pressured the major derivative dealers in 2009
to clear CDSs on European reference entities through CCPs based in Europe.41
Location requirements for the clearing of derivatives, or jurisdiction-specific
authorization requirements for cross-border access have also been introduced
in many jurisdictions outside of the European Union, generating new challenges
for international cooperation. As the FSB noted in 2014, “few CCPs are cur-
rently permitted to operate in more than one or two jurisdictions, which poses
challenges to the wider global uptake of central clearing, in particular for partici-
pants engaged in cross-border transactions.”42 In 2016, the FSB also expressed
the concern that the absence of cross-border availability of CCPs was potentially
leading authorities to “delay consideration and adoption of specific central clear-
ing determinations by an authority whose CCP is not yet authorised abroad.”43
The implementation of other G20 commitments has generated similar frag-
mentation trends. For example, in implementing the trading requirement, US
regulators have required that every trading platform used by US market actors,
regardless of its geographical location, should come under US regulatory
oversight. As Gravelle and Pagliari’s chapter notes, this move has triggered a
39
Coffee 2014:9.
40
Financial Stability Board 2011.
41
Pagliari 2013a.
42
43
Int roduc tion 13
bifurcation in a number of markets, as European trading platforms have sought

to escape the US rules. Similarly, Knaack’s chapter describes how, instead of rely-
ing on one single TR to collect information on trades globally for each asset class,
a multitude of TRs with more restricted national or regional reach have emerged
in a variety of jurisdictions across the world, The chapter shows how the cross-
border sharing of information across these different TRs is plagued by obstacles
that have proven difficult to overcome. The G20 leaders committed in June 2012
to develop a “global legal entity identifier (LEI) system for parties to financial
transactions, with a global governance framework representing the public inter-
est.”44 Although the LEI system has addressed initial technical inconsistencies,
trade reporting faces legal obstacles that undermine cross-border compatibility
of OTC trade reporting and the capacity of regulators to obtain a global picture
of the OTC derivatives markets.
These kinds of jurisdictional issues—in combination with differences in the
timing and the content of the rules implemented across countries—have gener-
ated a number of heated disputes. Given the highly international nature of deriv-
atives, it is no surprise that the FSB has noted “that resolution of cross-border
issues continues to be the most significant implementation issue.”45 To address
these issues, the G20 leaders agreed in September 2013 that “jurisdictions and
regulators should be able to defer to each other when it is justified by the quality
of their respective regulatory and enforcement regimes, based on similar out-
comes, in a non-discriminatory way, paying due respect to home country reg-
ulation regimes.”46 Regulators from the largest jurisdictions such as the United
States and European Union have signaled support for mechanisms such as “sub-
stituted compliance” and “equivalence and recognition” to solve cross-border
regulatory issues, but Gravelle and Pagliari show how in practice the application
of these mutual recognition tools has frequently failed to rein in the extraterri-
torial application of US and EU rules. Two years after the G20 commitment to
defer to each other’s rules, the FSB noted that “only a small number of jurisdic-
tions” had made “deference determinations” to other jurisdictions’ regulatory
regimes.47
Since then, several specific decisions have been made to defer in some way to
foreign jurisdictions’ regulatory regimes for CCPs.48 But the difficulties in reconcil-
ing different and overlapping regulatory regimes continue to threaten to generate
fragmentation along territorial lines not just in terms of the content of regulations
44
G20 2012: 8.
45
46
G20 2013:17.
47
48
Financial Stability Board 2016b: 2, 23.
but in global derivatives market activity itself.49 Already, regulators have noted that
inconsistencies and cross-border issues emerging in the implementation of the
G20 agenda have triggered a “reorganisation of business activities along jurisdic-
tional lines.”50 In a July 2015 report, the FSB also emphasized that “some authori-
ties note that the absence of deference may contribute to market fragmentation.”51
In sum, this volume’s second core theme is to call attention to the fact that
implementation of the modest G20 reform agenda has been associated with
many unexpected outcomes: delays, inconsistencies, conflicts between jurisdic-
tions, and growing regulatory fragmentation. The last outcome is particularly
significant. Not only does it challenge the G20’s initial goals, but it threatens to
undermine the globally integrated nature of derivatives markets. In this sense,
this unintended consequence of the G20 agenda may have more radical conse-
quences for derivatives markets than the aims of the initial agenda itself.
The Politics of Derivatives Regulation after

the Global Financial Crisis
What explains both the emergence of the G20 regulatory agenda and the dif-
ficulties associated with its implementation? To address this question, we need
to understand the politics that shape derivatives regulation. This subject has
received less attention than the politics of regulation in other financial sectors
such as international banking. Literature that does exist on the topic focuses
mostly on the weak nature of public regulation before the 2008 crisis. Building
on the analytical insights of some of that literature, this volume develops its third
core theme: that post-2008 trends in derivatives regulation are best explained
as a product of a complex interplay of transnational, inter-state, and domestic
political dynamics.52
The Transnational Political Context

In explaining the pre-crisis pattern of regulation, many analysts have pointed
to the power and influence of a transnational private community of finan-
ciers working through various transnational private bodies such as ISDA.53 As
Helleiner 2014a.
49

50
51
Financial Stability Board 2015a: 25.
52
This framework also builds on Helleiner and Pagliari 2011.
53
See, e.g., Biggins and Scott 2012, 2013; McKeen-Edwards and Porter 2013; Morgan 2008,
2010; Porter 2005. See also Tsingou’s (2003, 2006, 2015) important work on the G30. For a
Int roduc tion 15
Spagna’s chapter notes, these private actors played a central role in constructing
these markets, dominating policy debates, and preempting stronger official reg-
ulation. At the core of this community was the small group of well-organized
dealer banks with strong material interests in OTC derivatives trading (which
accounted for up to 40% of their profits before the crisis).54 Their influence
was strengthened by the lack of expertise and incentives among politicians to
challenge their preferences, as well as by their ability to secure access to leading
technocratic financial officials with whom they shared a common background,
expertise, and worldview shaped by neoliberal ideology and modern finance
theory.55
How influential have these transnational private groups been over the direc-
tion of regulatory reforms in the derivatives sector in the post-crisis period? As
noted earlier, ISDA and the leading dealer banks have worked closely with pub-
lic authorities to assist in the implementation of core goals of the G20 reform
agenda. But the dealer banks have also continued to lobby fiercely against
reforms that might challenge their central role in the markets. As a number of
chapters in this volume note, this lobbying has helped to fend off calls for more
radical reform and to water down G20 goals at the implementation phase. As
Lockwood’s chapter argues, existing transnational industry practices also cre-
ated a certain path-dependency in some areas, making it more difficult for public
actors to impose dramatically new governance regimes.
In general, the relationship between public authorities and ISDA has been
less cooperative than before the crisis. For example, ISDA’s willingness to coop-
erate with public regulators broke down when public authorities endorsed more
“anti-market” forms of regulation such as the strengthening of position limits
on commodity derivatives. As Helleiner’s chapter explains, ISDA launched an
unprecedented legal challenge in late 2011 to block the initial detailed rules of
the United States that were aimed at strengthening position limits, a challenge
whose success forced a major delay in the US implementation. As noted by
Knaack, as well as by Gravelle and Pagliari, transnational private financiers have
equally been very critical of developments such as the proliferation of TRs and
the resort to extra-territorial rules.
From the other side, public authorities have also shown a much greater will-
ingness to assert their authority vis-à-vis transnational private groups such as
ISDA and to pursue initiatives that diverged from their preferences. For exam-
ple, in 2009, they successfully pressured ISDA to change its internal governance
broader structural analysis of the political economy of derivatives before the crisis, see Bryan and
Rafferty 2006.
54
Statistic is from McLean and Nocera 2010: 104. See also Biggins and Scott 2013.
55
Porter 2014; Tsingou 2003, 2006, 2015; McKeen-Edwards and Porter 2013: 43–46.
to give greater representation to investor groups that were supportive of their

goals to promote greater market transparency.56 More generally, while ISDA and
other private transnational groups continue to remain important players in the
post-crisis derivatives markets, they are no longer the primary drivers of change
in international rule-making. In the wake of the crisis, it was the official sector—
not ISDA and the dealer banks—that took over this role in developing the new
G20 regulatory reform agenda.
The speed with which the G20 agenda was developed can be attributed at
least in part to the density of transgovernmental networks of financial officials
with expertise in this area.57 These networks have emerged not just through the
G7/G20 process but also through a large array of international standard-setting
bodies (SSBs) such as the FSB, the BCBS, IOSCO, the Committee on the Global
Financial System (CGFS), and the Committee on Payment and Settlement
Systems (renamed Committee on Payments and Market Infrastructures, CPMI).
Also important have been more specialist bodies that have brought together
financial officials from leading financial powers to focus exclusively on deriva-
tives regulation. Some of these already existed before the crisis (such as the OTC
Derivatives Supervisors Group created in 2005), but the majority emerged in
its aftermath including the OTC Derivatives Coordination Group, the OTC
Derivatives Working Group, the OTC Derivatives Regulators Forum, the OTC
Derivatives Regulators Group, and OTC Derivatives Assessment Team.
The commitment of officials in these expert networks to regulatory reform
after the crisis was greatly strengthened by the new prominence of a “macro-
prudential” framework for thinking about regulation. This framework empha-
sized the need to tackle the build-up of “systemic risk,” and it quickly became the
new conventional wisdom in official expert circles after the crisis. Within this
new ideational frame, poorly regulated OTC derivatives came to be seen as a key
source of systemic risk because of their interconnectedness, opacity, excessive
leverage, and contribution to pro-cyclicality. Increasingly dense transgovern-
mental expert networks were centrally important in forging this new ideational
consensus that, in turn, shaped and justified the G20 reform agenda.58
At the same time, it is important not to overstate the influence of these trans-
governmental networks. The development of the standards drafted by these
networks has been uneven and characterized by delays. One challenge has been
the fragmented and weak nature of the transgovernmental institutional environ-
ment in this area. As Posner’s chapter notes, there is no established transnational
institution with the same kind of experience, capacity, and legitimacy to act as a
56
McKeen-Edwards and Porter 2013: 44.
57
Helleiner 2011, 2014a.
58
Ibid.
Int roduc tion 17
focal point in the development of derivatives rules that the BCBS has in the area
of international banking standards. Posner argues that this contrast explains the
sequencing of rule-making in the derivatives sphere, where the design of new
derivatives regulatory frameworks in key jurisdictions such as the United States
and the European Union often preceded rather than followed the transnational
rule-making process. It also accounts for the fact that European and US authori-
ties have often preferred to resolve the jurisdictional issues bilaterally, rather
than through transnational networks.
The unexpected delays, inconsistencies, conflicts, and fragmentation that
have arisen at the implementation stage also reflect weaknesses in the broader
governance of international financial standards as a whole. Governance of these
standards relies on soft-law and network-based institutions that lack power
to effectively coordinate and constrain the actions of national authorities. As
Knaack’s chapter highlights, the institution at the center of efforts to coordi-
nate the implementation of the overall G20 financial regulatory agenda—the
FSB—is a toothless body of this kind. Although it has consistently declared the
implementation of derivatives regulatory reforms as one of its highest priority
issues, the FSB has been forced to rely only on relatively ineffectual monitoring
exercises and peer reviews to promote this outcome.59
The Inter-State Context

In addition to showing the influence of these transnational dynamics, this vol-
ume demonstrates how post-crisis regulatory trends have also been shaped by
competition and power among states. In explaining the weak nature of pre-crisis
regulation, analysts often pointed to the significance of competitive deregulation
dynamics between leading states. As Spagna describes in her chapter, US and UK
officials feared that tighter official regulation would push highly mobile OTC
derivatives activity to the other’s territory.60 Before 2008, international compet-
itive pressures also encouraged many governments to incorporate ISDA’s ideas
into national legislation, as a way of attracting business to their markets.61
Several chapters in this volume illustrate how competitive pressures have
continued to shape regulatory trends in the post-crisis period. Interestingly,
however, these pressures have not always generated deregulatory trends. For
example, Helleiner’s chapter shows how competitive pressures help to explain
why US authorities played the lead role in strengthening international stan-
dards. Once US authorities had decided to tighten domestic regulations, they
59
See also Knaack 2015.
60
Coleman 2003; Helleiner 2011, 2014a.
61
Biggins and Scott 2012.
recognized the need to push other jurisdictions to follow suit via the G20 in
order to ensure a level playing field for US businesses and trading infrastruc-
tures.62 Other jurisdictions seeking to tighten domestic regulations, such as the
European Union, faced similar incentives to support and follow the G20 agenda.
In this way, the rapid emergence of G20 reform agenda reflected not just the
successful agency of transgovernmental networks but also national concerns
about inter-state competitive pressures undermining domestic reform objec-
tives. Competition helped to generate cooperation.
Inter-state competition and concerns for inter-state distributional conse-
quences have also clearly influenced the politics of reform implementation. In
some instances, competitive pressures helped to undermine implementation
when individual jurisdictions chose not to fully comply with international stan-
dards as a means of attracting footloose business. A number of the contributors
to this volume suggest that the uneven and inconsistent implementation of G20
goals in the United States, Europe, as well as Asia can be explained partly through
this lens. In other cases, however, competitive dynamics may have accelerated
the implementation of specific aspects of the G20 agenda. For example, one rea-
son policymakers in Europe have promoted the establishment of local CCPs has
been to capture rapidly expanding clearing business.63
Inter-state power relationships have also helped to shape post-crisis regula-
tory trends. As Posner’s chapter emphasizes, the high concentration of deriva-
tives market activity within the United States and European Union has given
those two jurisdictions major leverage to dictate the main dimensions of the G20
agenda in this sector.64 Posner notes that, for this reason, they have often simply
resorted to bilateral negotiations to move the international reform agenda for-
ward. Indeed, there is little evidence that the perspectives of other jurisdictions
have influenced the development of the content of international reform agenda
in significant ways.65
To prevent other jurisdictions from undercutting their efforts to tighten
domestic regulatory standards, US and European authorities have relied not just
on their diplomatic resources in the G20 and other international fora. The chap-
ters by Gravelle and Pagliari, and Helleiner describe how they have also flexed
their market power by threatening extraterritorial application of their rules and
the exclusion of non-complying firms from their markets in their domestic
legislative frameworks. These threats have encouraged foreign jurisdictions to
endorse the international reform agenda of the United States and the European
62
See also Helleiner 2011, 2014a.
63
Pagliari 2013b; Norman 2012.
64
For this case more generally in international financial regulation, see also Posner 2009.
65
Mügge 2014: 64–65.
Int roduc tion 19
Union, but they have also generated considerable conflict and fragmentation—
including between the United States and the European Union themselves—at
the implementation stage as noted in the previous section.
Li’s chapter highlights how US and EU market power has not, however,
prevented some East Asian jurisdictions from implementing reforms in ways
that deviate from the expectations of these leading powers and of international
standard-setting bodies. Rejecting a simple passive rule-taking role, East Asian
authorities have set their own autonomous pace of adapting to the post-crisis
international priorities and “cherry-picking” among different parts of the G20
derivatives agenda in order to promote the development of local derivatives
markets and to increase their share of the fast-growing regional derivatives mar-
kets in the area. Li shows how emerging markets in East Asia have also skillfully
resisted external pressures by leveraging the power of US and European private
dealers based in their region and exploiting differences between EU and US
rules. In these ways, these less powerful states have demonstrated not just their
desire but also their considerable ability to carve out “power-as-autonomy” to
develop a more independent regulatory path in ways that has contributed to the
uneven implementation of G20 goals.66
The Domestic Political Context

The chapters in this volume also point to the importance of domestic political
dynamics in explaining post-crisis trends in derivatives regulation. One such
dynamic is the changing levels of domestic political salience of the issue of deriv-
atives regulation. Literature on the pre-crisis period highlighted how the subject
of derivatives regulation rarely attracted much sustained attention among politi-
cians or the wider public in the United States and Europe where most trading
took place. This low domestic political salience of the issue allowed dealer banks
and expert officials to dominate policymaking in those jurisdictions before 2008.
There were occasional exceptions when crises or scandals generated brief public
debate, but the latter did not last long enough to generate sufficient domestic
support for tighter public regulation.67
The chapters in this volume show how this situation changed dramatically
within both the United States and the European Union in 2008 because of the
severity of the financial crisis and the use of taxpayer money to bail out institu-
tions whose troubles were linked to derivatives. As Helleiner’s chapter notes,
public attention was also drawn to derivatives markets by the 2008 and 2010‒11
66
For the concept of “power as autonomy,” see Cohen 2006.
67
Pagliari 2012, 2013a; Tett 2009.
spikes in politically sensitive energy and agricultural prices that were blamed in
part on unchecked speculation in commodity derivatives markets. In the face of
outrage from the general public, domestic politicians demanded tighter regula-
tion and heads of state placed the issue on the agenda of the high-profile G20
leaders’ meetings.
If the higher domestic political salience of derivatives helped generate the G20
reform agenda, it also complicated the politics of implementation. Agreements
reached at the international level were not always fully compatible with the legis-
lative initiatives launched by elected politicians in US Congress or the European
Parliament who were suddenly more interested in this issue but had a more
parochial focus.68 Gravelle and Pagliari emphasize how greater domestic con-
cerns about systemic risk and costs to be borne by taxpayers also encouraged
rules about extraterritoriality that contributed to conflict and fragmentation at
the international level.69 Knaack’s chapter shows how the difficulties in the TR
reform agenda can be attributed in part to obstacles imposed on new kinds of
international cooperation by domestic legislatures.70
At the same time, as distance from the crisis grew, the domestic political sali-
ence of derivatives began to decline somewhat in the United States and European
Union. This development, however, did not always make the implementation of
G20 goals easier. A number of chapters show how lower levels of issue salience
and the shift toward the more technical phase of implementation often provided
greater space for private sector opponents of stricter rules to exercise greater
influence over outcomes.
Post-crisis regulatory trends have also been strongly shaped by patterns of
interest-group mobilization within countries. Analyses of the pre-crisis period
reveal how dealer banks were the interest group most involved within US and
European domestic discussions about derivatives regulations before 2008.
They remained very involved after the crisis, helping to shape domestic legis-
lation as well as to block, water down, or delay the domestic implementation
of initiatives that did not serve their interests.71 But contributors to this vol-
ume also highlight the active roles of a broader set of domestic interest groups.
For example, Pagliari’s chapter shows how some US reforms opposed by the
dealer banks were strongly supported by others in the financial industry such
as organized exchanges and interests associated with the buy-side of the mar-
ket, such as institutional investors.72 Helleiner also notes how the initiative to
68
Knaack 2015.
69
See also Pagliari 2013b; Mügge 2014: 55, 65–66; Helleiner 2014a.
70
71
See, e.g., Litan 2010; Morgan 2010, 2012.
72
See also Helleiner 2011, 2014a; Morgan 2012.
Int roduc tion 21
tighten position limits in commodity derivatives markets was strongly backed

by broad-based US domestic coalition of consumer advocacy groups, inter-
national development organizations, environmentalists, and many produc-
ers, distributors, retailers, and end-users in the agricultural, food, and energy
sectors.73
At the same time, in their efforts to dilute tough reforms, the dealer banks suc-
cessfully mobilized new alliances with corporate “end-users” outside the finan-
cial sector whose costs would rise as a result of regulatory initiatives.74 When
business lobbies were more unified in this way, Pagliari shows that they were
usually more successful. Li’s analysis of the implementation of the G20 agenda
in East Asia also points to the importance of “new” financial interests associated
with emerging local derivatives markets and established transnational dealers
in generating complex dynamics that influence the distinct path taken by these
jurisdictions.
A final domestic political variable shaping the content and pace of implemen-
tation of post-2008 reforms is the domestic institutional context within which
rule-making has taken place. For example, the implementation of Dodd-Frank
has been delayed and complicated by the need for coordination among multi-
ple US regulatory agencies with diverging priorities and mandates and internal
divisions, such as the SEC, CFTC, Federal Energy Regulatory Commission,
Office of the Comptroller of the Currency, Federal Reserve, and Federal Deposit
Insurance Corporation.75 Pagliari’s chapter highlights how implementation has
been made even more difficult by the unwillingness of Congress to increase the
resources available to regulators such as the CFTC. The analyses in this vol-
ume also bring out how the development of new European legislation for OTC
derivatives has been slowed considerably by the institutional complexities of
European cooperation.
To explain both the emergence of the G20 regulatory agenda and the difficul-
ties associated with its implementation, the chapters in this volume thus suggest
the need for analysts to examine a complicated set of interacting transnational,
inter-state, and domestic political dynamics (see table I.2). Many of these are
quite distinctive from the dynamics that shaped derivative regulation before the
crisis. Others are familiar to those who have studied pre-crisis regulatory poli-
tics, but some of these dynamics—such as competitive pressures or the degree
of power of transnational private elites—have manifested themselves in new
ways in the post-crisis environment.
73
See also Clapp and Helleiner 2012; Helleiner and Thistlethwaite 2013.
74
See also Pagliari and Young 2013, 2014.
75
Table I.2 The political dynamics of post-2008 derivatives regulation

Political Key Drivers of Change
Context
Transnational • Transgovernmental networks and institutions (G20, FSB, SSBs)

• Transnational private interests and institutions (ISDA,
authoritative practices)
Inter-State • Competition for market share between jurisdictions
• Market power and priorities of the United States and
European Union
• Power-as-autonomy of weaker states
Domestic • Changing levels of political salience
• Patterns of interest group mobilization
• Domestic institutional context
Conclusion
Alongside its analyses of various aspects of the politics of derivatives regulation
after the 2008 crisis, this volume develops three core themes. First, while G20
leaders have endorsed greater public regulatory control over derivatives markets,
it is important not to overstate the degree of change embodied in this agenda.
The G20 goals have been primarily focused on enhancing the transparency and
resilience of the markets rather than constraining their growth. The G20 leaders
have also endorsed continued delegation of key governance functions to profit-
seeking private actors and private rule-making in ways that are reminiscent of
the pre-crisis world. Despite the severity of the crisis, the G20 leaders’ agenda
was thus not a manifesto to change the prominent place of derivatives in the
world economy in a radical manner.
Second, many unexpected outcomes have arisen as policymakers set out
to implement the G20 reform agenda. Implementation has been inconsistent
across jurisdictions and has been subject to unanticipated delays. Considerable
tensions have also emerged between jurisdictions as the timing and content of
their respective rules have diverged and as governments have resorted to extra-
territorial application of their new rules. These developments, in turn, have
resulted in a growing fragmentation of the regulation of derivatives markets,
a quite different result than G20 policymakers initially intended and one with
potentially larger significance for the trajectory of global economic governance
after the crisis.
Finally, both the emergence of the G20 reform agenda and its implementa-
tion have been influenced by a complex combination of transnational, inter-state,
Int roduc tion 23
and domestic political dynamics. At the transnational level, outcomes have

been shaped by transgovernmental networks and transnational private finan-
cial groups, each with their own institutions. Important political dynamics have
also included intense inter-state competition for market shares as well as inter-
state power plays involving the projection of power by the United States and
European Union and the protection of autonomy by less powerful countries. At
the domestic level, post-crisis regulatory trends have reflected changing levels of
political salience of derivatives regulation, patterns of interest group mobiliza-
tion, and distinctive institutional structures.
These three core themes are developed through detailed analyses of a number
of aspects of the politics of post-2008 derivatives regulation. In chapter 2, Posner
examines the dynamics of international regulatory coordination between the
United States and European Union. In c hapter 3, Gravelle and Pagliari explore
how these two jurisdictions have implemented the G20 agenda in an extraterri-
torial way. In c hapter 4, Li shifts the focus to the role of East Asian countries in
the post-2008 reform process. In c hapter 5, Pagliari zeros in on the US case to
explore the role of domestic interest groups in the politics of implementing the
Dodd-Frank. The last three chapters explore in more depth three core issue areas
in the post-2008 reform process: the push for greater use of central clearing-
houses (Lockwood’s chapter 6), efforts to strengthen position limits over com-
modity derivatives (Helleiner’s chapter 7), and the new information reporting
requirements (Knaack’s chapter 8). Before turning to these detailed analyses,
however, Spagna’s chapter 1 provides an analysis of the growth of OTC deriva-
tives and their regulation before 2008, as well as their contribution to the 2008
crisis.
Acknowledgments
The authors would like to thank Matthew Gravelle, Kate McNamara, and two
anonymous reviewers for their valuable comments on an earlier draft of the
chapter, as well as to acknowledge the contribution by the Social Sciences and
Humanities Research Council of Canada.
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organs, as the lung, the testicle, the liver, the spleen, etc. The
dependence of miliary tuberculosis of the pia upon previously-
existing caseous or other inflammatory deposits in some part of the
body is acknowledged by most modern pathologists. Seitz3 states
that out of 130 cases, with autopsies, of adults, upon which his work
is based, such deposits were found in 93.5 per cent. General
constitutional weakness, either congenital or resulting from grave
disease or from overwork, from insufficient or unwholesome food,
and from bad hygienic surroundings, also favors the deposit of
tubercle in the meninges. Sometimes two or more predisposing
causes exist at once. Thus, a child born of tuberculous parents may
be fed with artificial diet instead of being nursed, or may live in a
house whose sanitary condition is bad. Hence the disease is
common among the poor, although by no means rare in the higher
classes of society. In some cases it is difficult or impossible to assign
any predisposing cause. A single child out of a numerous family may
be stricken with the disease, while the rest of the children, as well as
the parents and other ascendants, are healthy. For instance, while
writing this article I had under observation a little boy six years old
whose parents are living and healthy, with no pulmonary disease in
the family of either. The only other child, an older brother, is healthy.
While apparently in perfect health the child was attacked with
tubercular meningitis, and died in seventeen days with all the
characteristic symptoms of the disease. At the autopsy there was
found much injection of the cerebral pia everywhere, a large effusion
of lymph at the base of the brain and extending down the medulla,
abundance of miliary tubercles in the pia and accompanying the
vessels in the lateral regions of the hemispheres, lateral ventricles
distended with nearly clear fluid, ependyma smooth, choroid
plexuses covered with granulations, convolutions of brain much
flattened. Careful investigation, however, will usually enable us to
detect some lurking primary cause, either in the family predisposition
or in the history of the patient himself.
3 Die Meningitis Tuberculosa der Erwachsenen, von Dr. Johannes Seitz, Berlin, 1874,
p. 317.
Season appears to have but little influence on the production of the
disease. The largest number of cases is observed during winter and
spring, owing doubtless to the influence of the temperature and
weather, and to the exclusion from fresh air, in favoring the
development of tubercle and the scrofulous diathesis. Males, both
children and adults, are somewhat more frequently attacked than
females.
In regard to the exciting causes it may be said that where a

disposition to the deposit of tubercle exists, anything which tends to
lower the vitality of the individual is likely to hasten the event. In
infants with hereditary tendency to tubercle, an improper diet is
especially liable to develop meningeal tubercle. In older children,
besides unwholesome or insufficient food and unfavorable hygienic
surroundings, the acute diseases common to that period of life, such
as the eruptive fevers, intestinal disorders, whooping cough, etc.,
often act as immediate causes. Sometimes the development of the
disease may be traced to over-stimulation of the nervous system by
excessive study, often aided by imperfect ventilation or overheating
of the school-room. Caries of the temporal bone from disease of the
middle ear may act as an immediate cause of tubercular meningitis,
although simple meningitis is of course a more frequent result of that
condition. The disease has been known to follow injuries of the head
from blows or falls. In a larger number of cases the exciting cause is
not discoverable, especially when the meningeal affection is simply
an extension of the disease from some other part of the body, as the
lungs, the bronchial or mesenteric glands, etc. This is often the case,
both in adults and in children, when tubercular meningitis
complicates pulmonary consumption.
SYMPTOMS.—The disease is most frequently observed in children

between the ages of two and seven years. It is much less common in
adults, who are generally attacked between the ages of twenty and
thirty years. In the majority of cases the invasion of the malady is
preceded by a prodromic stage, usually occupying from a few days
to several weeks, though sometimes extending over a considerably
longer period. This stage probably represents the process of deposit
of miliary tubercles in the pia mater before their presence has given
rise to much structural change in the tissue. The characteristic
symptoms of the prodromic stage consist chiefly in an alteration of
the character and disposition of the patient, varying in extent in
different cases. In general, it may be said that he becomes sad,
taciturn, apathetic, irritable, indisposed to play, often sitting apart
from his companions, gazing in a strange way into vacancy. There is
diminution or loss of appetite and some emaciation. He is restless at
night, is disturbed by nightmare, or grinds his teeth. The digestion is
deranged. Usually there is constipation, but occasionally diarrhœa,
or these conditions may alternate with each other. Squinting and
twitching of the facial muscles are sometimes noticed. Headache
may occur early in this stage, but it is usually observed later, and it
then forms a prominent symptom. Vomiting is also frequent, usually
not preceded by nausea, sometimes provoked by sudden
movement, as in sitting up in bed, and is apt to occur when the
stomach contains little or no food. These symptoms vary much in
degree, and they are often so slight that they pass unnoticed by the
parents or friends. Occasionally the patient, if a child, will manifest a
strange perversity or an unusual disobedience, for which he is
perhaps punished under the belief that his misconduct is intentional.
In older children and in adults delirium, especially at night,
sometimes followed by delusions which may be more or less
permanent, is frequent at this stage. The above symptoms often
remit from time to time, and during the interval the patient may seem
to have recovered his health. The prodromic symptoms are rarely
altogether wanting in children, although they may have escaped
notice from lack of opportunity of observation on the part of the
physician. On the other hand, as Steffen4 justly observes, the most
characteristic symptoms may be present, and lead even an
experienced observer to a confident diagnosis of tubercular
meningitis during the early stage of a case of typhoid fever or of
cerebral congestion without tuberculosis.
4 “Meningitis Tuberculosa,” by A. Steffen, in Gerhardt's Handb. der Kinderkrankheiten,
5 B., 1ste Abth., 2te Hälfte, p. 465.
For convenience of description it is customary to divide the disease
proper, after the prodromal period, into three stages—viz. of
irritation, compression, and collapse. In some cases it is not difficult
to observe these divisions, but it must be borne in mind that in others
the symptoms do not follow any regular sequence, so that no
division is possible. In infants profound slumber may be the only
morbid manifestation throughout the entire disease. Steffen records
such a case, and I have seen two similar ones.
First Stage: The interval between the prodromic period and the first
stage is usually so gradual that no distinction between the two can
be detected. In other cases the disease is ushered in suddenly by
some striking symptom, such as an attack of general convulsions,
with dilated pupils and loss of consciousness. This is not often
repeated, though partial twitchings of the limbs or of the muscles of
the face may follow at intervals. In young children a comatose
condition, with unequal pupils, is apt to take the place of these
symptoms. The principal phenomena of the first stage are headache,
sensitiveness to light and sound, vomiting, and fever. The latter
varies much in intensity from time to time, but is not usually high, the
temperature seldom rising above 103° F., and usually, but not
always, higher at night than in the morning; but there is no
characteristic curve. The pulse varies in rate, but is usually slow and
irregular or intermittent. The respiration is irregular, with frequent
sighing. The tongue is dryish and covered with a thin white coat. The
bowels are costive. Delirium is frequent at night, and the sleep is
disturbed, the patient tossing about and muttering or crying out. The
eyes are half open during sleep. These symptoms become more
marked from day to day. The pain in the head is more frequent and
severe; the patient presses the hands to the forehead or rests the
head against some support if sitting up. During sleep he occasionally
utters a loud, sharp cry, without waking. There is increasing apathy,
and some intolerance of light, shown by an inclination to turn toward
the wall of the room or to lie with the face buried in the pillow. The
appetite is lost, the constipation becomes more obstinate, the
slowness and irregularity of the pulse persist. With the rapid
emaciation the belly sinks in, so that the spinal column can be easily
felt. Soon the child falls into a state of almost continual somnolence,
from which, however, he can be awakened in full consciousness,
and will answer correctly, generally relapsing again immediately into
slumber. His restlessness diminishes or ceases altogether, and he
lies continuously on the back with the head boring into the pillow. He
becomes more passive under the physician's examination, in strong
contrast to his previous irritability. At the end of a week or more from
the beginning of this stage symptoms of irritation of some of the
cerebral nerves begin to show themselves, in consequence of
pressure from the increasing exudation at the base of the brain and
into the ventricles. Strabismus (usually convergent), twitching of the
facial muscles and grimaces, grinding of the teeth, or chewing
movements of the mouth are noticed. The somnolence deepens into
sopor, from which it becomes more and more difficult to arouse the
patient, who gradually becomes completely insensible.
Notwithstanding the alarming and often hopeless condition which

this assemblage of symptoms indicates, intervals of temporary
amendment not unfrequently take place. The child may awake from
his lethargy, recognize those about him, converse rationally, take his
food with relish, and exhibit such symptoms of general improvement
that the parents and friends are led to indulge in fallacious hopes,
and sometimes the physician himself ventures to doubt the accuracy
of his diagnosis. Such hopes are of short duration; the unfavorable
symptoms always return after a brief interval. The duration of the first
stage may be reckoned at about one week.
Second Stage: This period is not separated from the preceding one
by any distinct change in symptoms. The patient lies in a state of
complete insensibility, from which he can no longer be aroused by
any appeal. The face is pale or of an earthen tint, the eyes are half
closed. If the anterior fontanel be still open, the integument covering
it is distended by the pressure beneath. Often one knee is flexed, the
opposite leg extended; one hand applied to the genitals, the other to
the head. Sometimes one leg or arm is alternately flexed and
extended. The head is apt to be retracted and bores into the pillow.
The pupils are dilated, though often unequal and insensible to light:
the sclerotica are injected; a gummy exudation from the Meibomian
glands forms on the edges of the lids. The patient sighs deeply from
time to time, and occasionally utters a loud, piercing cry. Paralysis,
and sometimes rigidity of one or more of the extremities, are often
observed, and occasionally there is an attack of general convulsions.
The pulse continues to be slow and irregular, the emaciation
progresses rapidly, and the abdomen is deeply excavated. The
discharges from the bladder and rectum are involuntary. The
average duration of the second stage is one week.
Third Stage: No special symptoms mark the passage of the second

stage into the third, which is characterized by coma, with complete
resolution of the limbs. The constipation frequently gives place to
moderate diarrhœa. The distended fontanel subsides, and often
sinks below the margin of the cranial bones. A striking feature of this
stage is a great increase in the rate of the pulse, the heart being
released from the inhibitory influence of the par vagum in
consequence of the complete paralysis of the latter from pressure.
The pulse varies in rapidity from 120 to 160 or more in the minute.
For the same reason the respiration also increases in frequency,
though not to the same degree. The eyelids are widely open; the
pupils are dilated and generally motionless, even when exposed to a
bright light. The eyes are rolled upward, so that only the lower half of
the iris is visible; the sclerotica is injected from exposure to the air
and dust. Convulsions may occur from time to time. Death
terminates the painful scene, usually in from twenty-four to forty-
eight hours, but sometimes the child lives on for days, unconscious,
of course, of suffering, though the afflicted parents and friends can
with difficulty be brought to believe it.
Certain points in the symptomatology of tubercular meningitis

demand especial consideration.
I have already observed that the division of the disease into definite
stages is purely arbitrary, and is employed here merely for
convenience of description; in fact, few cases pursue the typical
course. A period of active symptoms and another of depression can
often be observed, but these frequently alternate. Stupor and
paralysis may characterize the early stage, and symptoms of
irritation, with restlessness, screaming, and convulsions,
predominate toward the end. Certain characteristic symptoms may
be wholly or in part wanting, such as vomiting, constipation, or
stupor.
The temperature shows no changes which are characteristic of the

disease. Throughout its whole course it varies from time to time,
without uniformity, except that it usually rises somewhat toward
night. It seldom exceeds 102° or 103° F., unless shortly before
death, when it may rise to 104° F., or even higher, and may continue
to rise for a short time after death.
During the premonitory stage the pulse offers no unusual

characteristics. Its frequency is often increased, as is usual in any
indisposition during the period of childhood, but it preserves its
regularity. Toward the close of this period, and especially during the
first stage of the disease proper, a remarkable change takes place. It
becomes slow and irregular, the rate often diminishing below that in
health. The irregularity varies in character; sometimes the pulse
intermits, either at regular or irregular intervals. An inequality in the
strength of different pulsations is also observed. These peculiarities
of the circulation are due to the irritation of the medulla and the roots
of the par vagum, by which the inhibitory function of that nerve upon
the action of the heart is augmented. During the last period, on the
other hand, the increasing pressure on the vagus paralyzes its
function, and the heart, freed from its control, takes on an increased
action, the pulse rising to 120 beats, and often many more, in the
minute. Robert Whytt, in his interesting memoir,5 dates the beginning
of the second stage from the time that the pulse, being quick but
regular, becomes slow and irregular; the change again to the normal
frequency, or beyond it, marking the commencement of the third
stage.
5 “An Account of the Symptoms in the Dropsy of the Ventricles of the Brain,” in the
Works of Robert Whytt, M.D., published by his son, Edinb., 1768, p. 729.
In the early stage the respiration presents nothing abnormal, but
when the pulse becomes slow and irregular the breathing is similarly
affected. Sighing is very common in the prodromal period and first
stage. Toward the end of the second stage the increasing paralysis
of the respiratory centre gives rise to the phenomena known as the
Cheyne-Stokes respiration, consisting of a succession of respiratory
acts diminishing in force until there is a complete suspension of the
breathing, lasting from a quarter to three-quarters of a minute, when
the series begins again with a full inspiration. In general, the
variations in the rate of the respiration follow those of the pulse,
though the correspondence is not always exact.
In the early stage of the disease the pupils are usually contracted
and unequal. They are sluggish, but still respond to the stimulus of
light. At a later period they become gradually dilated, and react even
more slowly to light or not at all, the two eyes often differing in this
respect. Ophthalmoscopic examination frequently shows the
appearance of choked disc and commencing neuro-retinitis. In rare
cases tubercles are seen scattered over the fundus of the eye. They
are about the size of a small pin's head, of a yellowish color, and of
sharply-defined contour. Neuro-retinitis and choked disc are not, of
course, pathognomonic of tubercular meningitis, and choroidal
tubercles are so rarely seen as to be of little avail in diagnosis. In
fact, they are less frequent in this disease than in general
tuberculosis without meningitis. In twenty-six cases of tubercular
meningitis examined by Garlick at the London Hospital for Sick
Children they were found only once.6 The effect upon the conjunctiva
of the unclosed lids has been already described.
6 W. R. Gowers, M.D., Manual and Atlas of Medical Ophthalmoscopy, Philada., 1882,
p. 148. See, also, Seitz, op. cit., p. 347; Steffen, op. cit., pp. 452 and 472; and
“Tubercle of the Choroid,” Med. Times and Gazette, Oct. 21, 1882, p. 498.
The tongue is somewhat coated soon after the beginning of the

disease, and the breath is offensive. The appetite is lost, and there is
decided emaciation in many cases during the prodromic period. The
thirst is usually moderate. Vomiting is one of the most constant
symptoms during the first period, and its occurrence on an empty
stomach is characteristic of tubercular meningitis. It is not usually
preceded by nausea, and often takes place without effort, by mere
regurgitation, the rejected fluid consisting chiefly of bile mixed with
mucus. Although constipation is the most common condition in the
early stage, and is often rebellious to treatment, yet in some cases
diarrhœa is observed, which may mislead the physician in respect to
the diagnosis. From the beginning of the second stage, and
sometimes earlier, the discharges from the bowels and the bladder
are involuntary.
DURATION.—The duration of tubercular meningitis, apart from the

prodromic period, which often can hardly be determined, averages
from two weeks to two weeks and a half. In exceptional cases death
may take place in a few days or a week, and occasionally a patient
may linger for several weeks,7 the difference being apparently due to
the rapidity of the tubercular deposit and of the resulting
inflammation and exudation. The patient usually takes to his bed at
the beginning of the first stage, but he may be up during a part of the
day until the beginning of the second. In rare instances the child will
be about, and even out of doors, until a few days before death.
7 Such a case is reported by Michael Collins in the London Lancet, March 8, 1884.
PATHOLOGICAL ANATOMY.—The essential lesion of tubercular

meningitis consists in a deposit of miliary tubercles in the pia mater
of the brain, giving rise to inflammation of that membrane and
exudation of serum and pus. In the early stage both surfaces of the
pia are reddened and more or less thickened, and present an
opaline appearance, while between them—that is, in the meshes of
the pia—we find a colorless and transparent fluid which is effused in
greater or smaller amount, resembling jelly when viewed through the
arachnoid. These conditions are sometimes observable on the
convexity of the hemispheres, but are much more abundant on the
lateral surfaces, and especially at the base. More distinct evidence of
inflammation is shown by the presence of a yellowish or greenish-
yellow creamy deposit on the surface of the pia, consisting chiefly of
pus, which is also much more abundant at the base than elsewhere,
especially about the optic commissure, infundibulum, pons Varolii,
and the anterior surface of the medulla. The cranial nerves may be
deeply imbedded in the deposit, which often extends into the fissure
of Sylvius, gluing together the adjacent surfaces of the lobes, and
accompanies the vessels, forming narrow streaks along the sides of
the brain up to the convexity.
The miliary tubercles or granulations consist of semi-transparent

bodies, grayish or whitish in color, varying in size from that of the
head of the smallest pin, indeed almost invisible to the naked eye, to
that of a millet-seed (whence their name). Larger masses are
frequently seen, formed by the aggregation of smaller granulations.
The tubercles are usually found on the inner surface of the pia,
always in the immediate neighborhood of the blood-vessels, which
they accompany in their ramifications, and are also scattered, in
greater or less numbers, throughout the purulent exudation from the
surface of the pia. They are most abundant at the base of the brain,
ascending the sides along the course of the vessels. Sometimes,
though rarely, they are more abundant on the convexity. The total
number varies; it is usually very large, but sometimes only a limited
number exists, even in well-marked cases, and along with intense
inflammation of the pia. The granulations are found in different
degrees of development—sometimes all of them similar in color,
size, and consistency, at others in various stages of fatty
degeneration. The distribution may be symmetrical in the two
hemispheres or irregular. Under the microscope (after suitable
preparation of the part) the bacillus tuberculosus in considerable
numbers may be found in the pia, in places adjacent to the
arterioles.8
8 See a case reported by Y. Dawson in the London Lancet, April 12, 1884, in which
tubercles were visible only by the microscope with numerous bacilli.
The ventricles of the brain are usually distended with a clear or

opalescent, rarely bloody, fluid, the amount of which generally
corresponds to the intensity and extent of the meningeal
inflammation, although sometimes it is not above the normal
quantity. The two lateral ventricles are affected in an equal degree;
the third and fourth ventricles are more rarely implicated. According
to Huguenin,9 it is doubtful whether acute inflammation of the
ependyma takes place in tubercular meningitis. Steffen also10 says
that the ependyma is not inflamed, and that it is not the seat of the
deposit of tubercles. This latter statement is denied by other
authorities, and Huguenin is inclined to believe that they may exist in
that membrane. In the following case, under my care, abundant
granulations were found on the surface of the ependyma:
9 G. Huguenin, op. cit., p. 499.
10 Op. cit., p. 449.
Olaf M—— (male), æt. 8 years, born in Denmark, entered

Massachusetts General Hospital Sept. 13, 1881. Maternal
grandmother died of consumption; paternal grandfather lived to the
age of ninety-five years. One brother had some disease of hip.
Patient was the child of poor parents and lived in an unhealthy
suburb of Boston. During the two preceding winters he had a bad
cough. He was apparently well till four weeks before his entrance,
when he complained of bellyache, and became listless, but he was
out of doors ten days before he came to the hospital. It was noticed
that he was sensitive to sound. No vomiting, no diarrhœa, no
epistaxis, no cry; some cough. He had been somnolent, and was
observed to swing his arm over his head while asleep. June 14,
when first seen by me, he was lying on his back, unconscious, eyes
half closed, pupils dilated, jaw firmly closed, much emaciated, belly
retracted, left leg occasionally flexed and extended. No priapism.
The optic discs were reddened. June 15, there is some intelligence,
he answers questions; keeps one hand on the genitals. June 16,
pupils contracted, does not swallow. June 18, left eye divergent,
conjunctiva injected, whole surface livid, cries out occasionally. Died
at midnight.
FIG. 30.
Autopsy.—General lividity of surface, much emaciation. Much fine
arborescent injection on outer surface of dura mater. Numerous
Pacchionian bodies. Yellow matter beneath arachnoid along course
of vessels on each side of anterior lobes. Abundant fine granulations
along course of vessels on each anterior lobe, on upper margins of
median fissure, along fissure of Sylvius, and on choroid plexuses.
Very little lymph at base of brain. Six or eight ounces of serum from
lateral ventricles, and abundant fine transparent granules over
ependyma of both. Numerous opaque granulations in pia mater of
medulla oblongata. Surface of right pleura universally adherent.
Mucous membrane of bronchia much injected; a considerable
amount of pus flowed from each primary bronchus. No tubercles in
lungs nor in peritoneum. No ulcerations in intestines. No other
lesions.
The choroid plexuses are generally involved in the inflammatory

process, and are sometimes covered with yellow purulent
exudations. As in the above case, large numbers of tubercles may
be found in them, notwithstanding the opinion of Huguenin that their
number is always small.
The substance of the brain in the vicinity of the tubercular deposit is

generally found in a more or less œdematous condition, owing to the
obstruction of the circulation resulting from compression of the
vessels by the tubercles and effused lymph. Softening, sometimes
even to diffluence, not unfrequently occurs in the neighborhood of
the deposit, probably from ischæmia (necrobiosis). If there be any
considerable amount of exudation in the ventricles, the convolutions
are flattened by compression against the cranial bones.
The above-described lesions are not confined to the brain, but may
extend to the cerebellum, the pons, the medulla, and the spinal cord.
If examinations of the latter were more frequent in autopsies of this
disease, we should doubtless find, as has been done in some
instances, that the membranes often show the characteristic
alterations of tubercular meningitis, and even the presence of
granulations in the cord itself. The lesions may extend throughout
the cord, and are especially noticed in the dorsal region and in the
vicinity of the cauda equina. Their presence explains some of the
symptoms evidently due to spinal origin, such as retraction of the
head with rigidity of the neck and of the trunk, contractions of the
limbs, tetanic spasms, priapism, paralysis of the bladder and rectum,
etc., which are common in simple spinal meningitis.
The deposit of miliary tubercles in the pia mater, with little or no
accompanying meningitis, is met with in rare instances. The
tubercles are few in number, but vary in dimensions, being
sometimes united together in masses of considerable size, which are
frequently encysted. Beyond thickening and opacity of the
membrane, their presence seems to excite but little inflammatory
reaction, but they are generally accompanied by ventricular effusion
which by its pressure gives rise to characteristic symptoms.
The principal lesions found in other organs of the body consist of

tubercle in various stages of development, caseous matter, diseases
of the bones, etc. Miliary granulations are chiefly seen in the lungs,
peritoneum, intestinal mucous membrane, pleura, spleen, liver, and
kidneys. The bronchial and mesenteric glands often contain caseous
masses, some of which are broken down and suppurating. The
testicles sometimes present the same appearances. In adults, the
most frequent lesion which is found external to the brain is
pulmonary tuberculosis in a more or less advanced stage. Tubercles
are also sometimes present in the eye. Angel Money11 states that out
of 44 examinations made at the Hospital for Sick Children, London,
the meninges were the seat of gray granulations in 42. The choroid
(one or both) showed tubercles 14 times (right 3, left 5, both 6), and
11 times there were undoubted evidences of optic neuritis. Twice the
choroid was affected with tubercle when the meninges were free; in
one of these instances there was a mass of crude tubercle in the
cerebellum; in the other, although there were tubercles in the belly
and chest, there were none in the head. So that 12 times in 42 cases
of tubercles in the meninges there were tubercles in the choroid—i.e.
about 31 per cent.
11 “On the Frequent Association of Choroidal and Meningeal Tubercle,” Lancet, Nov.
10, 1883.
DIAGNOSIS.—In many cases tubercular meningitis offers but little

difficulty in the diagnosis. Although the symptoms, taken singly, are
not pathognomonic, yet their combination and succession, together
with their relation to the age, previous health, and antecedents of the
patient, are usually sufficient to lead us to a correct opinion. The
prodromic period of altered disposition (irritability of temper or
apathetic indifference), headache, constipation, vomiting, and
emaciation, followed by irregularity and slowness of the pulse,
sighing respiration, sluggishness and irregularity of the pupils; the
progress from somnolence to unconsciousness and coma; the
sudden lamentable cry; the convulsions and paralysis; the return of
rapid pulse and respiration in the last stage,—are characteristic of no
other disease. Our chief embarrassment arises during the insidious
approach of the malady, before its distinctive features are visible or
when some important symptom is absent. Its real nature is then apt
to be overlooked, and, in fact, in some cases it is impossible to
decide whether the symptoms are indicative of commencing cerebral
disease, or, on the other hand, are owing to typhoid fever, to a
simple gastro-intestinal irritation from error in diet, to worms in the
alimentary canal, to overwork in school, or to some other cause.
Under these circumstances the physician should decline giving a
positive opinion until more definite signs make their appearance. It
must be remembered that very important symptoms may be absent
in cases which are otherwise well marked. In all doubtful cases the
family history should, if possible, be obtained, especially whether
one or both parents or other near relatives have been consumptive
or have shown symptoms of scrofula or tuberculosis in any form, and
whether the patient himself has signs of pulmonary tuberculosis, of
enlarged or suppurating glands, or obstinate skin eruptions. The
presence or history of those conditions would add greatly to the
probability of tubercular meningitis.
The diseases for which tubercular meningitis is most liable to be

mistaken are acute simple meningitis, typhoid fever, acute gastro-
intestinal affections, eclampsia of infants and children, worms in the
intestines or stomach, the hydrencephaloid disease of Marshall Hall,
and cerebro-spinal meningitis.
Acute meningitis is distinguished from the tubercular disease by its

sudden invasion without prodromatous stage, by the acuteness and
intensity of the symptoms, the severity of the headache, the activity
of the delirium, the greater elevation of the temperature, and by its
brief duration, which rarely exceeds one week. In those exceptional
cases of tubercular meningitis in which the prodromal period is
absent or not observed and the course is unusually rapid, it would be
perhaps impossible to distinguish between the two diseases. A
family history of tubercle, or the discovery of the granulations in the
choroid by ophthalmoscopic examination, might save us from error
under such circumstances. The great rarity of idiopathic simple
meningitis should be remembered. Meningitis from disease of the
ear sometimes resembles the tubercular affection, but the history of
the attack, usually beginning with local pain and otorrhœa, will in
most cases prevent any confusion between the two forms of
disease.
The early period of typhoid often bears considerable resemblance to

that of tubercular meningitis. Headache, languor, restlessness, and
mild delirium are common to both. Typhoid can be distinguished by
the coated tongue, the diarrhœa, the enlargement of the spleen, the
tympanites, abdominal tenderness and gurgling, the eruption, and,
above all, by the characteristic temperature-curve, which, if
accurately observed, is conclusive. The course of typhoid fever is
comparatively uniform, while that of tubercular meningitis is often
extremely irregular. It should not be forgotten that the two diseases
may coexist.
The presence of worms in the alimentary canal may cause

symptoms somewhat like those of tubercular meningitis, and the
symptoms of the latter disease are occasionally erroneously
attributed to those parasites. The administration of an anthelmintic,
which should never be omitted in doubtful cases, will clear up all
uncertainty.
Cerebro-spinal meningitis is usually an epidemic, and therefore not

likely to be confounded with the tubercular disease. In sporadic
cases it can be recognized by its sudden onset and acute character,
by the eruption, and by the prominence of the spinal symptoms.
The so-called hydrencephaloid disease of Marshall Hall is a
condition of exhaustion and marasmus belonging to infancy, caused
by insufficient or unsuitable nourishment, by diarrhœa, and by the
injudicious depletive treatment so much in vogue in former times,
when the affection was much more common than at present. Some
of its symptoms, such as sighing respiration, stupor, pallor, and
dilated pupils, bear a certain resemblance to those of tubercular
meningitis, though it would be more easily confounded with chronic
hydrocephalus. The absence of constipation, headache,
convulsions, and vomiting, and the favorable results of suitable
nourishment and stimulants, serve to distinguish it from cerebral
disease.
Eclampsia, or sudden convulsion, is common in infants and young

children, and, since the occurrence of a fit may be the first or the
most striking symptom in tubercular meningitis, it is important to
ascertain its origin. In the majority of cases convulsions in children
arise from some peripheral irritation, such as difficult dentition,
worms in the alimentary canal, constipation, fright, etc., acting
through the reflex function of the spinal cord, which is unusually
sensitive in the early period of life. The absence of previous
symptoms, and the discovery of the source of the irritation, with the
favorable effect of its removal by appropriate treatment, will in most
cases suffice to eliminate structural disease of the brain. In others
we must withhold a positive opinion for a reasonable time in order to
ascertain whether more definite symptoms follow. Convulsions also
occasionally form the initial symptom of the eruptive fevers,
especially scarlatina. Here the absence of prodromal symptoms, and
the speedy appearance of those belonging to the exanthematous
affection, will remove all sources of doubt. Convulsions, with or
without coma, occurring in the early stage of acute renal
inflammations, may simulate the symptoms of tubercular meningitis.
An examination of the urine will show the true nature of the disease.
In addition to the above diseases there are some cerebral affections

of uncertain pathology which resemble tubercular meningitis, but
which are not generally fatal. As Gee justly remarks,12 “Every
practitioner from time to time will come across an acute febrile
disease accompanied by symptoms which seem to point
unmistakably to some affection of the brain, there being every
reason to exclude the notion of suppressed exanthemata or
analogous disorders. After one or several weeks of coma, delirium,
severe headache, or whatever may have been the prominent
symptom, the patient recovers, and we are left quite unable to say
what has been the matter with him. To go more into detail, I could not
do otherwise than narrate a series of cases which would differ from
each other in most important points, and have nothing in common
excepting pyrexia and brain symptoms. There is, generally,
something wanting which makes us suspect that we have not to do
with tubercular meningitis. Brain fever is as good a name as any
whereby to designate these different anomalies; cerebral congestion,
which is more commonly used, involves an explanation which is
probably often wrong, and certainly never proved to be right.” No
doubt such cases are occasionally cited as examples of recovery
from tubercular meningitis.
12 “Tubercular Meningitis,” by Samuel Jones Gee, M.D., in Reynolds's System of
Medicine, Philada., 1879, vol. i. p. 832.
PROGNOSIS.—Although there are on record undoubted instances of

recovery from tubercular meningitis, yet their number is so small that
practically the prognosis is fatal. It is safe to say that in almost all the
reported cases of recovery the diagnosis was erroneous.13 Even
should the patient survive the attack, he is usually left with paralyzed
limbs and impaired mental faculties, and dies not long afterward from
a recurrence of the disease or from tuberculosis of the lungs or other
organs.
13 Hahn, “Recherches sur la Méningite tuberculeuse et sur le Traitement de cette
Maladie” (Arch. gén. de méd., 4e Série, vols. xx. and xxi.), claims to have cured 7
cases, but of 5 of them there is no evidence that they were examples of tubercular
meningitis at all. The subject of the curability of tubercular meningitis is ably treated
by Cadet de Gassicourt (Traité clinique des Maladies de l'Enfance, vol. iii., Paris,
1884, p. 553 et seq.). His conclusion is that most of the alleged cures are cases of
meningitis of limited extent, arising from the presence of tubercular tumors, syphilitic
gummata, cerebral scleroses, and neoplasms of various kinds.
TREATMENT.—In view of the fatality of the disease, and of its frequent

occurrence in childhood, the prophylactic treatment is of great
importance. Every effort should be made to protect children whose
parents or other near relatives are tuberculous or scrofulous, and
who are themselves delicate, puny, or affected with any
constitutional disorder, from tubercular meningitis, by placing them in
the best possible hygienic conditions. Pure air, suitable clothing,
wholesome and sufficient food, and plenty of out-of-door exercise
are indispensable. Sedentary amusements and occupations should
be sparingly allowed. Especial pains should be taken to prevent
fatigue by much study, and school-hours should be of short duration.
The hygiene of the school-room is of paramount importance, and if
its ventilation, temperature, and light are not satisfactory, the child
should not be permitted to enter it. The bed-chamber should be well
ventilated night and day. A sponge-bath, cold or tepid according to
the season or to the effect on the patient, should be given daily,
followed by friction with a towel. The bowels must be kept regular by
appropriate diet if possible, or by simple laxatives, such as magnesia
or rhubarb. For delicate, pale children some preparation of iron will
be useful. The choice must be left to the practitioner, but one of the
best in such cases is the tartrate of iron and potassium, of which
from two to six grains, according to the age, may be given three
times daily after meals. Cod-liver oil is invaluable for scrofulous
patients or where there is a lack of nutrition. A teaspoonful, given
after meals, is a sufficient dose, and it is usually taken without
difficulty by children, or if there be much repugnance to it some one
of the various emulsions may be tried in proportionate dose. Along
with this, iodide of iron will in many cases be found useful or as a
substitute for the oil when the latter cannot be borne. It is best given
in the form of the officinal syrup, in the dose of from five to twenty
drops. Change of air is useful in stimulating the nutritive functions,
and a visit to the seashore or mountains during warm weather will
often be followed by general improvement.
Since it is not possible to arrest the disease when once begun, the
efforts of the physician must be directed toward relieving the
sufferings of the patient as far as possible. In the early period the
restlessness at night and inability to sleep will call for sedatives, such
as the bromide of sodium or of potassium, in the dose of ten or
fifteen grains at bedtime or oftener. This should be well diluted with
water, sweetened if necessary. The addition of five to twenty drops of
the tincture of hyoscyamus increases the effect. Sometimes chloral
hydrate, either alone or combined with the bromide when the latter
fails, will procure quiet sleep. From five to ten grains may be given at
a dose, according to the age. Compresses wet with spirit and water
or an ice-cap may be applied to the head if there be much pain in
that region, or it may be necessary to give opium in some of its forms
by the mouth, such as the tincture or fluid extract, in doses of from
one to five drops. Constipation is best overcome by means of
calomel in three- to five-grain doses, to which may be added, when
necessary, an equal amount of jalap powder, or an enema of
soapsuds may be administered. Active purging should be avoided.
Liquid nourishment, such as milk, gruel of oatmeal, farina, or barley,
beef-tea, broths, etc., must be given in moderate quantities at
intervals of a few hours so long as the patient is able to swallow.
Occasional sponging of the whole surface with warm or cool water,
and scrupulous attention to cleanliness after defecation, especially
when control of the sphincters is lost, will add to his comfort. He
should occupy a large and well-ventilated chamber, from which all
persons whose presence is not necessary for his care and comfort
should be excluded. He should be protected from noise and from
bright light, and should lie on a bed of moderate width for
convenience of tending.
There is no specific treatment at present known which is likely to be

of any benefit in this disease, any more than in tuberculosis of other
organs than the brain. Common experience has shown that mercury,
which formerly had so high a reputation in the treatment of cerebral
diseases of early life, not only fails completely, but adds to the
sufferings of the patient when pushed to salivation. The iodide of
potassium is recommended by almost all writers, but, so far as I

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Governing the World's Biggest Market:

The Politics of Derivatives Regulation

Published in the United States of America by Oxford University Press

© Oxford University Press 2018

All rights reserved. No part of this publication may be reproduced, stored in

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CIP data is on file at the Library of Congress

List of Illustrations vii

Introduction—Governing the World’s Biggest Market: The Politics

1. Becoming the World’s Biggest Market: OTC Derivatives before

2. Financial Regulatory Cooperation: Coordination of

3. Global Markets, National Toolkits: Extraterritorial Derivatives

4. Power Plays from the Fringe: East Asian Responses to Derivatives

5. The Second Half: Interest Group Conflicts and Coalitions

6. The Politics and Practices of Central Clearing in OTC

7. Positioning for Stronger Limits? The Politics of Regulating

8. A Web without a Center: Fragmentation in the OTC Derivatives

1.1 The global OTC derivatives market 31

AFC Asian Financial Crisis

Dodd-​Frank Dodd-​Frank Wall Street Reform and Consumer

ODRG OTC Derivatives Regulators Group

Matthew Gravelle recently completed his PhD in Political Science at the

Governing the World’s

In the wake of the crisis, policymakers in the G20 jurisdictions committed to

What Have Been the Goals of the G20

The Limits of Change

Central clearing • All standardized OTC derivatives should be cleared

interest rate, and equity derivatives.18 In addition, as the chapter by Matthew

What Have Been the Results of Efforts

Delays and Inconsistencies

continued to influence the effectiveness of trade reporting requirements, includ-

Conflict and Fragmentation

extraterritorial provisions regulating trades between non-​EU entities when

bifurcation in a number of markets, as European trading platforms have sought

The Politics of Derivatives Regulation after

The Transnational Political Context

Financial Stability Board 2014: 26.

to give greater representation to investor groups that were supportive of their

The Inter-​State Context

The Domestic Political Context

tighten position limits in commodity derivatives markets was strongly backed

Table I.2 The political dynamics of post-​2008 derivatives regulation

Transnational • Transgovernmental networks and institutions (G20, FSB, SSBs)

and domestic political dynamics. At the transnational level, outcomes have

In regard to the exciting causes it may be said that where a

SYMPTOMS.—The disease is most frequently observed in children

Notwithstanding the alarming and often hopeless condition which

Third Stage: No special symptoms mark the passage of the second

Certain points in the symptomatology of tubercular meningitis

The temperature shows no changes which are characteristic of the

During the premonitory stage the pulse offers no unusual

The tongue is somewhat coated soon after the beginning of the

DURATION.—The duration of tubercular meningitis, apart from the

PATHOLOGICAL ANATOMY.—The essential lesion of tubercular

The miliary tubercles or granulations consist of semi-transparent

The ventricles of the brain are usually distended with a clear or

10 Op. cit., p. 449.

Olaf M—— (male), æt. 8 years, born in Denmark, entered

The choroid plexuses are generally involved in the inflammatory

The substance of the brain in the vicinity of the tubercular deposit is

The principal lesions found in other organs of the body consist of

DIAGNOSIS.—In many cases tubercular meningitis offers but little

The diseases for which tubercular meningitis is most liable to be

Dodd-Frank Dodd-Frank Wall Street Reform and Consumer

extraterritorial provisions regulating trades between non-EU entities when

The Inter-State Context

Table I.2 The political dynamics of post-2008 derivatives regulation