The Creeping Takeovers via Derivatives

The 1980s marked a major turning point in the functioning of international financial markets. In order to finance their growing budget deficits, developed countries adopted liberalization as a core principle and undertook a sweeping deregulation of their financial systems. This opening of national markets to globalization was accompanied by a significant boom in financial engineering. New categories of financial instruments emerged, including derivatives. First appearing in the 1970s, these instruments experienced spectacular growth, reaching $785 trillion in global assets by the early 2000s. The complexity and diversity of derivatives make them difficult to understand from a legal perspective. This lack of a legal framework, along with the opacity surrounding derivatives due to their excessive technicality, has led to their misuse for fraudulent purposes. The discretion inherent in these instruments has, in particular, enabled creeping takeovers within publicly traded companies.