User:StainlessSteelRat/Sandbox/Frontier Regulatory Market

A Frontier Regulatory Market, Abrv: FRM, is a frontier market that requires or will require regulation as part of an accepted and trusted regulatory regime to preserve the integrity and smooth operations of the marketplace. It has a regulatory infrastructure that may be weaker or less developed than emerging markets that isn't sufficient to command the confidence of all the market participants and stakeholders. In a Frontier Regulatory Market, current and prospective participants and stakeholders need to assume excessive risk due to lack of efficiency, transparency and accountability. It serves as a strong barrier to entry delaying the development and maturation of the marketplace and creates market uncertainties and inefficiencies due to an environment in which actionable data is both difficult to collect and properly analyze.

Three areas requiring clear and trusted regulations and compliance include:

1. Statutory Regulations established by governmental institutions to ensure market integrity that may require periodic compliance filings
2. Vendor Regulations representing requirements set forth by individual or groups of market participants or stakeholders to efficiently govern their transactions and business dealings with other market participants or stakeholders in order to mitigate market risks and/or satisfy statutory compliance for the party setting forth the vendor compliance terms. Compliance is often reliant on enhanced supply chain visibility.
3. Internal Governance regimes for market participants to ensure proper internal risk management, accountability and business analysis. The risks to be mitigated are operational, financial, market and statutory. Compliance is often dependent on proper and timely data collection and analysis as well as efficient dissemination of such data and analysis.

Origin

The term is a regulatory technology, Abrv: regtech, term first used by David Shelters, co-founder of logistics data analytics platform Ovalz, to describe their targeted vertical markets.

Categories of Frontier Regulatory Markets

Frontier Regulatory Markets can be categorized into the following four groups:

1. A Newly Emerged Marketplace where an entirely new regulatory regime needs to be constructed from nothing. The basic underlying tenants of a future regulatory regime remains to be identified and stakeholders themselves are uncertain of what regulatory outcomes they would prefer. The Crypto Currency Market is a good example.
2. An Immature Marketplace is characterized by a fluid regulatory environment. Basic regulatory tenants and stakeholder preferences have been identified. Initial regulations have been either proposed or implemented, however, given the uncertainty of the future dynamics of the marketplace there is a broad expectation that any proposed or implemented regulations will likely be only transitory. In this environment stakeholders predominantly manage the regulatory risk individually rather than collectively. Given the vulnerability and volatility of the immature marketplace forms of self-regulation is much preferred over the hasty implementation of statutory regulations. Crowd Funding is an excellent example of an immature regulatory market in which the various stakeholders are working diligently to identify a proper balance between creating a favorable environment for innovation and protecting investors while allowing the industry to continually develop with minimal interruptions in order to allow for “discovering” an optimal path to a proper regulatory regime.
3. A Conflictual Marketplace is where it is difficult for the stakeholders to reach a consensus on how the market is to be properly operated and regulated. It may also be that multiple existing regulatory regimes overlap. Cross-border e-commerce is such a market.
4. A Disrupted Marketplace is one experiencing such a disruptive shock that a substantial re-organization of the existing regulatory regime needs to be conducted in short order. The emergence of fin tech startups and their disruptive effects on existing banking regulations as well as the introduction of ride-sharing services such as Uber and its disrupting effect on existing taxi industry regulations are clear examples of age-old regulatory regimes rapidly transformed into Frontier Regulatory Markets.

The implication of Frontier Regulatory Markets is that a current “Wild West” environment exists in which existing market participants or new entrants need to proceed at their own risk. However, the expectation is the various market participants, driven by mutual benefit, will take both individual and collective actions to eventually establish a trusted regulatory regime mitigating the assumed risk and increasing the potential returns through enhanced market efficiencies and growth for all participants.

See Also

• Frontier market

External links

• Ovalz
• David Shelters on LinkedIn