The Future for the Global Securities Market: Legal and Regulatory Aspects

EDMUND W. KITCHI

The regulatory and institutional structure of securities markets is one of the ways that they compete with each other for business. London competes with New York and the continental markets. The over-the-counter markets compete with the exchange markets. The structure of a market may offer superior features such as greater depth, faster execution, less price impact, more confidentiality, more reliable clearing. Or it may offer lower costs. This competition is a factor that no regulator and no market can ignore. As a result it is an important determinant of the structure of securities regulation in every country. Is this a good or a bad thing?

To the extent that regulators and legislators are influenced by the answer to that question it is one of practical importance. If they believe that the competition produces undesirable results, they can attempt to suppress it by cooperating with other national regulators to adopt uniform rules and procedures. They can insist that the over-the-counter markets resemble, as closely as possible, organized exchanges. If they believe that the competition produces desirable results, they can facilitate it by permitting the entry into their markets of securities and securities salesmen from other jurisdictions.

It is possible, of course, to view the regulatory issues as reflecting nothing more than a struggle for advantage between competing political and market centers in which concerns about what is better or worse are of no importance. It is easier, for instance, to explain the provisions of US state blue sky laws which automatically qualify securities traded on the NYSE or NASDAQ, but do not accord the same status to securities traded on any non-US markets, as reflecting the successful exercise by US political actors of their clout rather than as the result of a view that an automatic qualification rule limited to US exchanges is the best rule. The importance of economic and political power in shaping securities regulation is more likely to be important to the extent that the concept of better or worse as applied to securities regulation has no compelling content. For purposes of this

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