Private Ordering, Self-Regulation and Futures Markets: A Comparative Study of Informal Social Control



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    • **NEIL GUNNINGHAM is currently a Professor of Law and Director of the Centre for Environmental Law and Policy at The Australian National University, Canberra. He has written extensively on issues of financial market regulation, occupational health and safety and the environment. His current work seeks to identify the comparative advantage of different regulatory instruments in different institutional, economic and social contexts and focuses particularly on issues of environmental protection.

  • *Much of the work for this article was undertaken while I was Visiting Research Fellow at the American Bar Foundation. I acknowledge the assistance of grants from the Criminology Research Council, the Australian Research Council and the Australian National University. As part of this study interviews were conducted with numerous (necessarily anonymous) industry participants in Chicago, Hong Kong and Sydney. Without their generosity this study would not have been possible.


This paper describes an empirical study of futures market regulation in three jurisdictions: Chicago, Hong Kong, and Sydney. It focuses on private ordering and argues that informal mechanisms of social control have been crucial in maintaining market “order” and curbing trading abuses. Peer group pressure, fear of being ostracized, the leverage of large institutional clients, the transparency of certain market dealings and the opportunities this provides for “pay back” between “repeat players”, have been far more important in ordering behavior than the remote and often unenforced rules imposed either by government or the exchanges themselves. It is suggested that to understand “crime in the pits” we should focus on criminogenic structures which facilitate fraud through specific combinations of opportunity and risk. It is also structural factors which substantially account for the relative success or failure of private ordering in constraining trading abuses in different markets.