The Role and Function of Private Trade Associations as a Private Regulator in Making Markets More Efficient and Stable: The ISDA, The ICMA and The LMA in Comparative Review

Abstract

Financial markets play a critical role for market-based economies: their safety and efficiency ensures and reflects the wealth and prosperity of society. But can markets function sufficiently well-regulated by themselves via standard market practices of private trade associations or do they require public regulation? This paper tries to answer this question by examining the regulation of international financial markets through the private regulation of three major private trade associations: the International Swaps and Derivatives Association (ISDA), the International Capital Market Association (ICMA) and the Loan Market Association (LMA). By using systematic approach the structure, the objects and the regulatory regimes of these three biggest private trade associations, their advantages and disadvantages as well as problems which they face are investigated and compared. Furthermore, in order to provide practitioners and researchers with an up-to-date reflection on a most pressing issue of modern financial markets the legal foundations of the recent research material and all relevant publicly available information provided by these private trade associations are critically evaluated. The most important conclusions and further open questions are outlined at the end.