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Money -- lots of it -- certainly makes the world go around. How these vast sums are regulated varies markedly according to country or culture, raising major accountability issues in this global era. In a major study, Monash Logan Fellow Dr George Gilligan is researching the variation in national attitudes towards financial market regulation and compliance. By Stuart Heather In the short time it takes to read this article, the world's financial markets routinely trade stocks, bonds, currencies and other instruments worth billions of dollars. Each day more than US$1.5 trillion passes through foreign exchange markets and globally fund managers control in excess of US$20 trillion for speculative investment. The movement of such vast sums thrives on a freedom and flexibility to maximise profits, but also requires a regulated environ- ment for greater security and certainty. Regulatory structures and processes vary considerably across national jurisdictions, even though globalisation, aided by advances in information technology, sends more investment capital cascading across international markets each year. The variation in national attitudes towards financial market regulation and compliance is at the centre of ground-breaking international comparative research by Monash criminologist Dr George Gilligan. "In each jurisdiction, there can be tensions between national self-interest and the priorities of finance capital," says Dr Gilligan, a Logan Research Fellow in the Depart-ment of Business Law and Taxation. Some nations have a 'regulatory culture', perhaps built over centuries, which tends to be more informal and self-regulatory, but others have national governments accustomed to keeping a tight rein on all aspects of national life. In the US, the UK, Japan, China, Malaysia and Australia, Dr Gilligan is interviewing regulators, other law enforcement agencies, market practitioners and consumer representatives about their structures and processes of financial services regulation. One key question is: How far should regulatory control go? "Increasingly," says Dr Gilligan, "national regulators are performing the role of mediators between diverse economic interest groups. Paradoxically, over the last 20 years, significant deregulation of the financial sector has been accompanied by setting up more regulatory agencies charged with applying more abstract and general standards." Manipulative practices Another question is how the various players view behaviours such as market manipulation and insider trading. For example, Dr Gilligan notes that in Japan the traditions of business networking and patronage known as keiretsu have produced high levels of cross-ownership between corporate groups, yet in other countries this situation might raise significant difficulties regarding issues of anti-competitive behaviour or possible manipulative practices.
Additionally, more ordinary citizens are getting involved directly in financial markets. For example in Australia, where following the demutualisation of AMP and privatisations such as the partial sale of Telstra, 40 per cent of the population now own shares. Public ownership Is there an ideal model for regulating financial markets? "The best models are continually evolving, responding to market needs and the political priorities superimposed on them," explains Dr Gilligan. There may be value in the Monash research for Australia's ambitions as a regional finance centre. Previously, there has been little work done to compare the significance of cultural and other normative factors upon financial services regulation across a range of jurisdictions. Dr Gilligan says he hopes his work will contribute to continuing efforts to develop optimum regulatory models for Australia's financial markets. However, it will be a challenge to realise the consolidation of capital and expertise which is the hallmark of the world's great traditional financial centres such as the City of London.
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