How effective are the enforcement activities of derivatives exchanges in the digital age? A survey of enforcement notices through the lens of humans
Journal of Financial Regulation and Compliance
ISSN: 1358-1988
Article publication date: 5 April 2024
Abstract
Purpose
The purpose of this paper is to scrutinise the effectiveness of four derivative exchanges’ enforcement efforts since 2007. These exchanges include the Commodity Exchange Inc. and ICE Futures US from the United States and ICE Futures Europe and the London Metal Exchange from the UK.
Design/methodology/approach
The paper examines 799 enforcement notices published by four exchanges through a behavioural science lens: HUMANS conceived by Hunt (2023) in Humanizing Rules: Bringing Behavioural Science to Ethics and Compliance.
Findings
The paper finds the effectiveness of the exchanges’ enforcement efforts to be a mixed picture as financial markets transition from the digital to artificial intelligence era. Humans remain a key cog in the wheel of market participants’ trading operations, albeit their roles have changed. Despite this, some elements of exchanges’ enforcement regimes have not kept pace with the move from floor to remote trading. However, in other respects, their efforts are or should be, effective, at least in behavioural terms.
Research limitations/implications
The paper’s findings are arguably limited to exchanges based in Anglophone jurisdictions. The information published by the exchanges is variable, making “like-for-like” comparisons difficult in some areas.
Practical implications
The paper makes several recommendations that, if adopted, could help exchanges to increase the potency of their enforcement programmes.
Originality/value
A key aim of the paper is to shift the lens through which the debate concerning the efficacy of exchange-level oversight is conducted. Hitherto, a legal lens has been used, whereas this paper uses a behavioural lens.
Keywords
Acknowledgements
The author would like to acknowledge Professor Simon Wolfe at the University of Southampton for his advice and support throughout the research and publication processes. The author would also like to thank members of his family for their understanding and patience.
Citation
Culley, A.C. (2024), "How effective are the enforcement activities of derivatives exchanges in the digital age? A survey of enforcement notices through the lens of humans", Journal of Financial Regulation and Compliance, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JFRC-08-2023-0132
Publisher
:Emerald Publishing Limited
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