Governing International Securities Markets: IOSCO and the Politics of International Securities Market Standards
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What explains the creation and strengthening of international securities market standards through the International Organization of Securities Commissions (IOSCO)? This thesis addresses this question by analyzing the creation and strengthening of four of IOSCO’s international securities market standards between 1991 and 2010 relating to the following issues: the governance of cross-border financial crime, the objectives and principles of domestic securities market regulation, the regulation of credit rating agencies, and the regulation of hedge funds. This thesis argues that the creation and strengthening of these standards is derived from the role and influence of three different political actors: the transgovernmental network of securities market regulators, domestic legislatures, and states. The role and influence of these different political actors differs across issue areas and across time. To account for the differentiated sources of international securities market standards, this thesis proposes a Principal-Agent (PA) analytical framework. Domestic legislatures (the principal) delegate to securities regulators (the agent) the authority to oversee and regulate domestic securities markets by granting regulators specific forms of statutory authority. Exercising discretion within this act of delegation, domestic securities regulators act together in a transgovernmental network to create and strengthen international securities market standards. They are prompted to act by threats to the integrity and stability of developed financial centers from under-regulated or ineffectively regulated foreign financial centers, as well as by new policy preferences of domestic legislatures seeking to regulate previously unregulated financial market actors. Domestic legislatures also use multiple agents to ensure that agents act consistent with their policy preferences: their concerns about the costs of under-regulated foreign jurisdictions can generate direct pressure from states on international financial regulatory institutions to strengthen the implementation of international financial standards. This thesis makes an empirical contribution to existing literature by analyzing previously understudied international securities market standards. This thesis also makes a theoretical contribution to both IPE literature and PA theory within International Organization (IO) literature. For IPE literature, this thesis establishes a theoretical framework that accounts for the differentiated role and influence of the transgovernmental network of securities market regulators, domestic legislatures, and states in the creation and strengthening of international securities market standards. For PA theory within IO literature, this thesis highlights the role of the principled professional interests of the transgovernmental network of securities market regulators in creating and strengthening international securities market standards.