The Trade Lifecycle: Behind the Scenes of the Trading Process, 2nd Edition

Chapter 16 Regulation

The greatest change that has occurred to trading in recent years has been the increase in regulation. The list of regulations such as EMIR, Dodd-Frank, UCITs, AIFMD and Basel III grows in depth and breadth to cover all aspects of trading and trade processes.

The subject of regulation is too vast to be covered in any one volume. Here we present a taste of how regulation affects modern investment banking, referring the reader to specific articles and books for more detailed explanations.¹

There are regulatory controls and initiatives across the globe, but overall there still remains less pressure in the Asia Pacific region and more in the Americas and Europe, the Middle East and Africa.

16.1 Purpose of regulation

Sovereign governments and international organisations recognise that financial institutions have a large influence on local and global economies. To provide control and protection, regulators have been established. The aims of financial regulation include:

1. To increase market confidence; to allow all interested parties to have confidence in the financial system.
2. To ensure financial stability; to reduce the chances of another credit crunch or other financial disaster.
3. To protect clients; to ensure that all consumers of financial services are treated fairly and protected from unwanted practices.
4. To reduce financial crime.

Major regulatory authorities

Apart from central banks such as the Federal Reserve and the Bank of England who have their own ...