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This chapter assesses Chinese capital markets. The starting point of modern Chinese capital markets can be identified as 1978, but momentum only gradually developed in the 1990s with the reintroduction of stock exchanges and the adoption of, first, companies legislation and then a securities act. As capital markets institutions and practices appeared in China, regulatory frameworks, imported primarily from the United States, the United Kingdom, and Hong Kong, arose around them. One of the secret ingredients to the dynamism of Chinese capital markets has been Hong Kong. Rather than an all-out competitive model, symbiosis marks the relationship between the mainland Chinese exchanges and HKEx. Indeed, there are continued endeavours to encourage integration between the Shenzhen Stock Exchange (SZSE), the Shanghai Stock Exchange (SSE), and HKEx.

This concluding chapter discusses how capital markets are changing, dramatically so. The massive innovation in investment products over the last 30 years is giving way to shifting trading patterns, changing investor profiles, and new forms of capitalism and finance. The dynamics of international markets have changed, even since the Asian financial crisis, when ‘contagion’ entered the financial lexicon. Now, information, investments, and capital can be transmitted instantaneously; so can risk. Indeed, the new markets defy the old rules. Technology pervades everything, giving rise to a new catchphrase, ‘fintech’. As financial markets have become inexorably interconnected, at the same time they appear increasingly disconnected from the real world, the real economy. The chapter then looks at the topography of the new regulatory landscape. The big economies, and their regulatory approaches, will continue to impact strongly international markets. But there are more and more big economies with resurgent capital markets, so the international dynamics will change.

This chapter details how the United States introduced a trio of regulatory initiatives which represented a turning point in international capital markets. The growing significance of international markets could no longer be ignored nor left to the regulatory hinterlands. The first two initiatives, Regulation S and Rule 144A (under the US 1933 Act), have become standard features of virtually all international capital raisings. Although very different in conception and operation, they are fraternal twins, both responses to a 1987 United States Securities and Exchange Commission (SEC) report on internationalization. They were considered and adopted by the SEC on the same day in April of 1990. The third initiative, the creation of a Multijurisdictional Disclosure System (MJDS) between Canada and the United States, is a younger sibling, conceived in the same flurry of interest in international markets, but making its appearance a year later.

This chapter studies the roles of intermediaries. As exchanges developed in Western Europe and the colonies, they spun out a widening web of intermediaries participating in the process of trading financial products. In the lead up to the global financial crisis, the roles assumed by intermediaries, and their sources of revenue, had mutated over time. Intermediaries became issuers and capital raisers in their own right. Originally handmaidens to the exchanges, intermediaries created a new, free floating, trading world. In this new trading world, the potential conflicts of interest inherent in agency relationships have been exacerbated by the multiple roles intermediaries have assumed. Further intensifying the stresses on market relationships have been the rapid changes in trading practices now permitted by technology and the internationalization of the capital markets. Lastly, over ten years after the global financial crisis, regulatory responses continue to play out, as markets and intermediaries jockey and adjust to the new rules.

This chapter examines the International Organization of Securities Commissions (IOSCO). Over the nearly four decades of its existence, as its composition and roles evolved, and in the absence of any other body, IOSCO became a focal point for oversight of international capital markets. Crises, first the regional Asian financial crisis of 1997–98 and then the global financial crisis, have dramatically changed IOSCO. Crises have also thrust capital markets into the international limelight, and led to the appearance of new international institutions, including the Financial Stability Forum (FSF) and the Financial Stability Board (FSB). Unlike IOSCO, both the FSF and the FSB were political initiatives. As such, they also drew into their orbit formal treaty organizations such as the International Monetary Fund (IMF) and The World Bank, among others. The chapter then looks at international financial institutions and the Financial Sector Assessment Program (FSAP).

This introductory chapter provides an overview of international capital markets. International capital markets are not a new phenomenon; in various forms, they have been around for centuries. The global financial crisis, however, shone a strong light on the workings of international capital markets. They had, unmistakably, been purveyors of systemic risk and seemingly attracted little by way of oversight or regulation. The chapter then assesses how international capital markets have been regulated and what lies on the regulatory horizon. It addresses securities regulation; capital market regulation; information disclosure; and self-regulation. There is no doubt that in a dozen years from now, the regulatory and institutional landscape of international capital markets will have been transformed. Adjustments to the shock of financial crisis have been working their way through systems around the world. Demographics and geopolitical forces are shifting, changing with them investment patterns, institutional models, and long-held assumptions about market behaviour. Information technology has also profoundly impacted information-based regulatory systems, outpacing regulatory responses.

This chapter discusses the regulatory techniques in the international capital markets. Regulation, as it is usually understood, emanates from a national (or perhaps sub-national) authority and operates locally. Capital markets predate the nation state and have been boundary blind. So, how have modern international capital markets been regulated? Different approaches have waxed and waned in popularity, but several broad groupings can be discerned: inaction; unilateralism; formal and informal cooperative efforts; and international or supra-national initiatives. The different regulatory approaches operating in modern international capital markets are not mutually exclusive; they often coexist or interact, in both a positive and negative manner. Ultimately, the different regulatory approaches to international capital markets, which ones dominate, which ones wither away, have been shaped by the geopolitical forces of empire, the emergence of the supra-national state, and hegemony.

This chapter looks at the new European capital markets. The creation of the European Securities and Markets Authority (ESMA) was ‘an epochal date for EU financial market regulation’. Whereas ESMA's role is primarily one of overall supervision and promotion of supervisory convergence, the 2007–09 financial crisis, which led to its birth, continues incrementally to push the European legislator toward reinforcing ESMA's powers and capturing increasingly more activities under the ‘Single Rulebook’. With the proposal of a Capital Markets Union and Brexit, this trend is likely to continue. Potentially, the European Union is now well placed to forge a new paradigm for the regulation of capital markets, given the increased focus and the technical expertise which ESMA brings to bear. At least in theory, the EU should no longer be beholden to US or international models for its regulatory models.

This chapter addresses niche markets. Niche markets are typically small, geographically challenged, and independently minded countries which, for various geopolitical reasons, have never reaped the economic benefits of expansion and empire. It is a hard business being a niche market, operating in a competitive and often unforgiving environment, engaging in constant repositioning, and facing inherent limitations on growth. Surprisingly, perhaps, there are lots of niche markets and a very diverse grouping they are, deploying a variety of survival strategies. In all cases, state capitalism, in various guises, supports these markets. In earlier times, reputation, a friendly regulator, and good business practices might have sufficed. Now, there is a new dynamic. As elsewhere, but more so in niche markets, technology is the game changer; small as well as large markets can be at the cutting edge. Technology is also providing the means for the creation of large interconnected networks of markets, which may continue to appear distinct on the surface, but which are deeply intertwined through integration of trading platforms as well as formal and informal alliances.

This chapter describes Islamic capital markets. Led by Malaysia and its distinct Islamic Market, Bursa Malaysia-I, Islamic finance has entered the mainstream of international capital markets, primarily in the form of ‘Islamic bonds’ (sukuk) and fund products. Saudi Arabia, with its well-publicized Saudi Aramco initial public offering (IPO) in 2019, raised, less successfully, a different flag in the international markets. Islamic finance has infiltrated conventional markets too. Non-Islamic issuers, sovereigns, corporates and international institutions, have issued sukuk, attracted by the wash of liquidity and investors in the Gulf region. Indeed, Islamic finance has been rubbing shoulders with modern conventional finance for several decades now. As ‘conventional’ finance has become less ‘conventional’, shari'a compliant finance has become more accepted. Impediments to growth persist; the imperviousness to standardization and the artificiality of the structures underlying the financial products increase costs and possibly risk, making the products uncompetitive. However, cost is not the only consideration in the marketplace. With greater interest in ethical and ESG (environmental, social, and governance) investing, Islamic finance may be the path or the way to future markets.

This chapter evaluates securities regulation in the United States. For a variety of reasons, domestic US securities regulation has served as a model to the world, either directly or through its influence in international standard setting. The parallel system, however, has not been exported and so remains a somewhat unique aspect of US law, and based on the concept of the foreign private issuer (FPI), appears firmly entrenched. Going forward, it is possible that the domestic and international aspects of US markets may become more integrated, or at least coordinated. Calls for greater EU-style deference to home country regulation for non-US issuers and market participants would certainly simplify, and perhaps undermine, the US parallel system. There is no doubt as to the decline of US hegemony in regulation of international capital markets. Within the United States, level playing field arguments continue to surface, sometimes in surprising ways.

This chapter explores stock exchanges, which are the most visible and vocal among capital market institutions. Despite the waves of demutualization and consolidation, exchanges remain idiosyncratic institutions. Even where similar structural reorganizations have occurred, the underlying factors prompting such moves, and potentially the on-going operations of the exchanges, are often quite different. As capital markets grew in importance, the role of exchanges extended beyond that of a trading venue. The modern exchange also serves political masters, acting as a national symbol in some cases, and thus eliciting regulatory responses not based on market considerations alone. More importantly, exchanges are imbued, implicitly or explicitly, with a ‘public interest’ due to their impact on the related issues of economic growth, systemic financial stability, and investor protection. The chapter then considers high frequency trading, which drove institutional investors off the exchanges and into the ‘dark pools’, creating concerns over exchange liquidity, transparency, and price-discovery.