There is substantial cross-national variation in the level of regulatory clarity surrounding cryptocurrencies. What explains these differences? And, more broadly, what drives the divergent historical development of market regulation in different jurisdictions? To answer these questions, we present a new conceptual framework centered on the concept of market legibility. This term, inspired by the sociological literature, refers to the extent to which markets are made legible to the state through standardization. We contend that state supply of, and market demand for, legibility drives the primary political-economic dynamics of market regulation. Specifically, these factors combine to produce ideal type states of legibility that correspond to both distinct stages of market development and the relative level of regulatory clarity in any one jurisdiction. This framework is utilized to conduct a comparative historical analysis of cryptocurrency regulation in the EU, US, UK, and Japan. By performing these tasks, this article corrects the common assumption that states are constantly striving to impose their authority on unwilling markets. It demonstrates instead that state and private actor preferences to make markets legible vary, conditioning, in turn, the political economy of regulatory governance.
National surveillance is often insufficient to identify transnational issues. One solution to this problem is to delegate to international organizations (IOs) the power to surveil activity in numerous states simultaneously, acting, in essence, as supranational detectives. When should we expect states to engage in such delegation? This article contends that this will depend on whether sub-state public agencies have acquired the exclusive capacity to surveil that phenomena at the national level. Those that have will actively oppose delegation to preserve the benefits afforded by that exclusivity, thereby reducing the likelihood that an IO is ultimately empowered to perform supranational surveillance. This hypothesis is tested against two case studies in which EU energy and securities regulators contemplated empowering an IO with supranational surveillance powers to detect transnational market abuse. Empirical evidence, drawing on 86 interviews, corroborates that each group’s pre-existing surveillance capabilities impacted their delegation preferences and, in turn, whether delegation occurred. These findings advance our understanding of supranational delegation and the politics of multi-level governance in the EU. Further, they shed empirical light on transnational market abuse, an understudied form of financial crime that hurts consumers, destabilizes prices, and facilitates the movement of illicit funds across borders.
Public agencies outsource a wide variety of tasks to nonstate actors, or what can be referred to as regulatory intermediaries. In certain circumstances, these agencies may seek to disempower those regulatory intermediaries by reclaiming, duplicating, or transferring the outsourced task. When will these disempowerment attempts be successful? This article presents the Market Structure Hypothesis, which contends that the level of competition between regulatory intermediaries will, all things equal, determine whether disempowerment attempts succeed. To test this hypothesis, this article examines the U.S. Securities and Exchange Commission’s attempts to acquire the independent capacity to conduct nationwide trade surveillance in the 1980s (Market Oversight Surveillance System) and 2010s (Consolidated Audit Trail). Evidence derives from archival materials, a Freedom of Information Act Request, and 60 interviews in Oxford, London, Toronto, New York City, and Washington, DC. The empirical results corroborate the hypothesis’ expectations, contributing to our understanding of public-private partnerships and shedding new empirical light on an understudied topic of securities regulation.
Since 1945 the number of multilateral development banks (MDBs) has increased at a linear rate, with approximately one new MDB created every three years. The proliferation of MDBs has resulted in an inefficient duplication of international institutions with overlapping functions. Further, this trend contradicts our existing understanding of why states create countervailing international organizations. This article proposes a novel, two-step theoretical model of institutional change and creation in an attempt to explain this empirical puzzle. Utilizing the complementarities of rational-choice and historical institutionalism, the model demonstrates that the rational actions of states in the past can lead to seemingly irrational institutional change in the future. This process results in the repetitive creation of countervailing MDBs designed to solve the same functional problems. To evaluate the model’s hypotheses, three case studies are undertaken, employing archival material, internal documents, and 48 interviews conducted by the author in London, Washington, D.C. and Manila, Philippines. The empirical results are of direct interest to policy-makers currently negotiating the structure of new MDBs in Asia and Latin America.
Advances in telecommunication technology in the nineteenth century encouraged greater centralization of liquidity on single, dominant exchanges in most major industrialized countries. Electronic trading, in contrast, has precipitated increased market fragmentation, creating a host of new regulatory dilemmas. In an attempt to understand this phenomenon, this chapter proposes a two-stage process of market structural development in response to electronic trading. This process is then examined in equities and foreign exchange markets. Despite significant differences between these two asset classes, they have exhibited a remarkably similar pattern of disintermediation followed by reintermediation. This analysis is followed by a survey of recent regulatory approaches to mitigate the negative externalities associated with electronic trading. It concludes with a brief discussion on the future of market fragmentation and centralization in global capital markets.
This chapter traces how technological changes have affected the structure and operation of currency markets, and examines the issues associated with these developments. These changes have caused significant concern within the industry and raise complicated questions about whether additional regulation is necessary. Nevertheless, they have received relatively little theoretical or empirical attention in comparison to similar developments in equities markets. To address this gap, the chapter outlines the primary market structural issues in foreign exchange markets, including potentially abusive trading techniques, last look, and perverse incentives to monetize access to speed and information. Further, the chapter provides an example of a high frequency latency arbitrage opportunity and discusses the potential mitigating impact of a randomized delay mechanism. This is followed by an analysis of recent regulatory efforts to address these issues in the UK, the EU, and the US, in addition to a review of industry-led initiatives to establish best practices for algorithmic traders and venue operators. The chapter concludes by discussing key questions and constraints for future research.
Good leadership in international organizations is necessary, but not sufficient, for their success. Structures supporting leadership vary enormously across global agencies. This report highlights some of the best practices across 11 organizations that facilitate good leadership. It also underscores that international institutions could learn from each other’s practices across seven domains: (1) selecting and re-electing leadership on merit, (2) managing performance, (3) setting and evaluating ethical standards, (4) developing and retaining talent, (5) setting strategic priorities, (6) engaging with a wide range of stakeholders, and (7) evaluating independently and effectively.
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