Cross-boundary information sharing in regulatory contexts: The case of financial markets

ABSTRACT

Most studies about cross-boundary information sharing (CBIS) focus on private or public sector organizations only. There is limited research within regulated environments, which often requires information to be shared among multiple public, private and nonprofit organizations. This paper explores CBIS in different regulatory contexts, with a focus on financial markets in the USA, and finds some unique characteristics in terms of information asymmetries, incentive and governance structures, and structural complexity.

IMPACT

While the importance and success factors of information sharing has been widely discussed between businesses within the industry, the knowledge gap between the regulator and the regulated has remained unexplored. The purpose of this paper is to help practitioners understand what prevents effective information sharing between the regulated and regulator, and among the regulators, given the unique socio-technological environment they are in. We developed an understanding of regulatory challenges of effectively monitoring market activities and mitigating systemic risk in the US financial market in relation to the cross-boundary information sharing challenges in various regulatory contexts

KEYWORDS:

• Cross-boundary information sharing (CBIS)
• financial market regulation (FMR)
• information sharing
• regulatory environment
• barriers and enablers

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 The concept of ‘calculus-based trust’ was originally introduced by Williamson (1993) who categorized different meanings of trust in economic organizations. He conceptualized calculative trust based on the subjective probability with which one assesses risk of another actor not performing a particular action. Because trust relates to risk, Williamson (1993) posited that ‘trust is warranted when the expected gain form placing oneself at risk to another is positive, but not otherwise’ (p. 463).

2 A swap is a derivative contract through which two parties exchange products and make transactions. The CFTC and the Securities and Exchange Commission (SEC) issued joint rules in 2012 that defined swaps under the Commodity Exchange Act 1936 and security-based swap under the Securities Exchange Act 1934. A mixed-swap is a transaction that is both a swap and a security swap and thus it is subject to the provisions of the two different securities laws and can fall under either the SEC or the CFTC’s oversight based on those regulatory agency’s interpretation of the securities laws.