The Political Dynamics of Derivative Securities Regulation

The U.S. regulation of derivative securities-financial instrumentswhose value is derived from an underlying security or index of securities-isdistinctive from that of other nations because it has multiple regulators forfinancial derivatives and securities. Commentators have debated whethershifting to the unitary regulator approach taken by other nations would bemore desirable and legislation to effect such a change has been repeatedlyintroduced in Congress. But it has not gotten very far. This article analyzesthe political history of the regulation of derivative securities in the UnitedStates, in order to explain the institutional difference between the U.S.regime and other nations\u27 and its staying power. It examines the fourprincipal federal regulatory initiatives regarding derivative securities (theFuture Trading Act of 1921, the Commodity Exchange Act of 1936, theCommodity Futures Trading Commission Act of 1974, and the FuturesTrading Practices Act of 1992), by a narrative account of the legislativeprocess and a quantitative analysis of roll-call votes, committee-hearingwitnesses, and issue salience