The regulatory overhaul of the global OTC derivatives markets, originating from the G20, is transforming what used to be a relatively harmonised private and transnational legal regime into a public regulatory space fragmented by diverse territorial jurisdictions. In this regulatory space jurisdictional borders are elusive. Especially the United States and the European Union are applying what seems to be a novel type of regulatory strategy designed to protect their market share and curb regulatory arbitrage. The strategy, dubbed here the Regulate Thy Neighbour strategy, builds on unilateralist application of extraterritoriality, forms of direct and indirect protectionism, and conditional deference. Deference strategies such as the US substituted compliance and the EU equivalence regime should be regarded as carrots, applied together with the sticks of extraterritoriality and protectionism to drive regulatory convergence towards the strongest. However, the EU and US have failed to fill the leadership void in the global financial governance system, which remains soft at its core, and instead locked themselves in a regulatory turf war which has prevented them from recognising each other’s regulatory frameworks or finalising their own. Meanwhile, looming risks of costly regulatory retaliation are increasing market fragmentation and deglobalisation. The emerging "titanic model" of systemic risk management, where risk is concentrated in presumably watertight national compartments rather than mutualised globally, is not the way towards a more stable global financial system. In the short term, a successful completion of the transatlantic partnership is needed in order to reach the derivative reform's ultimate goals and to counter financial fragmentation. But acknowledging the many practical and political problems involved in the exportation of rules through the Regulate Thy Neighbour strategy, which can also be manifested in a bilateral form, this paper joins the increasing number of scholars calling for more global and multilateral forms of financial governance.

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This article builds on a recent case (Case T-496/11, UK v. ECB (Location policy)), in which the General Court determined that the ECB does not have competence to regulate so-called Central Counterparties (CCPs), and annulled an ECB policy which sought to restrict access to the euro area of certain non-euro area CCPs. It is argued that the Court’s central finding, though possibly correct, is problematic from the perspective of financial stability, especially considering the growing systemic importance of CCPs. Second, the Court’s finding is symptomatic of certain drawbacks inherent in the patchy architecture of the evolving EU financial stability regime, which is excessively focused on banks. Finally, the case acts as a warning of likely future situations where the exercise of EU level competences and forms of direct administration related to the objective of financial stability can result in an outright conflict with basic free movement rights.

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Using Finnish case law on complex financial products as an example, this paper deals with the question of what role national courts could, and indeed should, have in the future disputes between investment firms and their clients, given that their private law relationship is embedded in an increasingly self-sufficient EU rulebook. Will there be room for principles deriving from national private law, or could the courts take a more active role in interpreting principles deriving from the MiFID itself? The paper argues that national courts should complement the ‘administrative paradigm’ of the European Union’s financial services law, enhanced by the new MiFID regime, with a more principles-based enforcement.

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This article assesses the European Union’s post-crisis approach to regulating financial markets. Elasticity of financial markets forces rule-makers to make choices under uncertainty as to not only how financial markets will evolve, but also how regulated actors will respond to the measures adopted. Regulating highly complex and dynamic systems such as financial markets requires flexibility and adaptability which traditional regulatory techniques and instruments often lack. The European System of Financial Supervision, set up after the 2008 financial crisis, has taken a leap towards further harmonisation of rules and vertical consolidation of powers. To avoid the risks of stagnation and rigidity, a change in the overall mode of governance is needed. This article presents two short cases, one dealing with the modified disclosure regime of the revised Transparency Directive and the other with implementation of the Alternative Investment Funds Directive , in order to examine how uniformity can be pursued without the corresponding loss of flexibility. The case studies demonstrate how the techniques used by the European Securities Markets Authority ( ESMA) and the Commission, which involve both formal and informal implementing measures, utilise the procedural flexibility of the post-Lisbon EU rule-making. However, more flexible EU legislation is also needed because any system of delegation is redundant without enabling legislative acts that surrender meaningful normative authority to sufficiently independent regulators. The article also discusses the ambiguous limits of the system’s flexibility in constitutional terms and addresses certain trade-offs and risks of the emerging mode of governance.

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