1. II Graduate Conference on Latin American Law and Policy Multiple Strategies of Financial Regulation adopted in Colombian Securities Market: The Case of OTC Derivatives Ligia Catherine Arias Barrera PhD Candidate University of Warwick 7 th march 2014

2. Introduction Combined approaches, strategies and tools of regulation Multiple and not well linked strategies of regulation Risk-based approach to Central Counterparties CCPs regulation

3. Colombian OTC Derivatives Market Smaller and less regulated than the stock exchange derivatives market Reasons: 1)More confidence in regulated markets 2)Level of economic development 3)Lack of information and knowledge No Regulation of Central Counterparties CCPs – market intermediaries.

4. Regulatory Strategies adopted in Colombian Securities Market Risk-based regulation Regulatory capture OECD Principles on Corporate Governance IOSCO Principles on Securities Regulation Investor - Consumer Protection

5. Risk-based Regulation Risk-based regulation is ‘a type of regulation that prioritizes regulatory actions in accordance with the assessment of the risk that regulated firms will present to the regulatory body’s achieving its objectives’ 1. Requires a strategy of regulation focused on the quality of a firm’s internal controls. Motivation of national authorities – Accountability of regulators ___________________________________ 1. Julia Black, ‘The Emergence of Risk-Based Regulation and the New Public Risk Management in the United Kingdom’ (2005) Public Law 512.

6. Risk-based regulation Challenges 2 Two stages: 1. Identification and evaluation of risks 1.1 Matching statutory objectives with key risks 1.2 Firms’ managerial attitudes- Meta-regulation 2. Implementation 2.1 Identifying intervention tools 2.2 Changing firms’ behaviour ___________________________________________________ 2. Robert Baldwin, Martin Cave and Martin Lodge, Understanding Regulation (Oxford University Press, 2012) 281

7. Risk-based Regulation in Colombian Securities Market Colombian Securities Law 964 of 2005 SFC Policy Document ‘Lineamientos Estrategicos’: Risk-based Supervision Integrated Framework for Supervision- Marco Integrado de Supervision (MIS)

8. Potential issues Regulation and Supervision Definition of Risk? The vicious circle on risk-assessment Focus on individual sites and markets Level of discretion of supervisors and the engagement of regulated firms

9. The Case of OTC Derivatives Lack of definition of OTC derivatives transactions Absence of regulation of CCPs in the form of a Clearing House Non-existence of specialised regulation and knowledge about the needs of the domestic market.

10. Bibliography Books Arner D W, Financial Stability, Economic Growth, and the Role of Law (Cambridge University Press 2007) Avgouleas E, Governance of Global Financial Markets: The law, the economics, the politics (Cambridge University Press 2012) Baldwin R; Cave M and Lodge M, Understanding Regulation: Theory, Strategy and Practice (Oxford, Second Edition 2012) Barth J, Caprio G and Levine R, Guardians of Finance: Making Regulators work for us (The MIT Press 2012) Stuart Bazley S and Haynes, A Financial Services Authority regulation and risk-based compliance, (Haywards Heath : Tottel, 2 nd c2007) Articles Awrey D, The Dynamics of OTC Derivatives Regulation: Bridging the Public-Private Divide (European Business Organisation Law Review 2010) Black J and Rouch D, The development of the Global Markets as Rule-Makers: Engagement and Legitimacy (Law and Financial Markets Review, 2008) Black J. Enrolling actors in regulatory processes: Examples from UK Financial Services Regulation (Public Law 2003) Black J, ‘ The Development of Risk Based Regulation in Financial Services: Canada, the UK and Australia’ A Research Report (September 2004) Black J, The emergence of risk-based regulation and the new public risk management in the United Kingdom (2005 Public Law 512, 2005)

11. II Graduate Conference on Latin American Law and Policy THANK YOU Ligia Catherine Arias Barrera PhD Candidate University of Warwick L.C.Arias-Barrera@warwick.ac.uk