Author: David Schwartz J.D. CPA
Though scholarly debates continue, the impact of credit derivatives on the law and policy of insider trading is still unexplored. This Article fills this gap to demonstrate that the emergence of credit derivatives marks a profound development for the prohibition against insider trading. It argues that the growth of credit derivatives problematizes traditional insider trading jurisprudence like never before. With the feasibility of current rules subject to question, this Article advocates for a radical rethinking of the present regulatory framework for one better suited to modern markets.
In his paper published August 28, 2013, Yesha Yadav of Vanderbilt Law School posits that the rise of derivatives like credit default swaps (CDS) has made the concept of insider trading inoperable in markets where these derivatives trade. Yadav's paper, "Insider Trading in the Derivatives Market (and What it Means for Everyone Else)," asserts that the credit derivatives markets actually may be more efficient by factoring in insider knowledge and transmitting this information more freely.