• allow securities exchanges to compete to offer both products and mechanisms to ensure the safety and soundness of those products, • instruct the Securities and Exchange Commission (SEC) to abandon plans to regulate price and order flows, and • restrict the SEC to acting against cases of actual fraud.
As Dale A. Oesterle of the University of Colorado–Boulder says, “The core of capitalism is the accumulation and use of capital by private individuals. Securities markets are indispensable for a prosperous free-market economy.” In those markets, or exchanges, companies raise the capital they need to run and expand their productive activities and individuals invest their savings. Over half of all Americans now own stocks, mostly through private retirement accounts like individual retirement accounts (IRAs) and 401(k) plans, and that portion is likely to grow in the future. Thus, the future of securities markets is more important than ever.
Exchanges, such as the New York Stock Exchange (NYSE), the country's largest, and the Chicago Board of Trade (CBT), have operated as exclusive, nonprofit organizations, similar to member-owned and memberoperated country clubs. The members themselves trade shares of stock with one another on physical floors, with specialized trading pits for different kinds of securities. Because their brokers possess specialized knowledge and have access to financing, exchanges can guarantee that there will always be buyers and sellers for their listed securities. It is the exchange members themselves, not the exchanges as organizations, that make profits as the middlemen executing trades.
In order to attract and keep customers, exchanges have had incentives to ensure that stocks traded by their members were from legitimate businesses.