Stock Market Futurism

By Fox, Merritt; Rauterberg, Gabriel | Journal of Corporation Law, Summer 2017 | Go to article overview

Stock Market Futurism


Fox, Merritt, Rauterberg, Gabriel, Journal of Corporation Law


The future is already' here. It 's just not evenly distributed.

-William Gibson1

If you shift everyone else 350 microseconds into the past, then it 's like you perpetually live in the future.

-Mattt Levine2

I. Introduction.795

II. The Stock Market Transformed.797

A. Yesterday 's Stock Market.798

B. Today 's Stock Market Menagerie.799

C. Consequences of the Regulatory Distinction.800

1. The Effects of Exchanges ' Liability Limits.801

2. The Effects on Exchanges' Conflicts of Interest.802

III. Forces of Convergence and Complexity.802

A. Exchange by Broker-Dealer.802

B. Brokerage by Exchange.803

C. Structural Interventions.805

IV. Stock Market Futurism.807

A. Visions of the Stock Market 's Future.807

I. One Self-Regulatory Status.807

B. Continued Disaggregation and Venue Choice.808

V. Conclusion.808

I. Introduction

The U.S. stock market is undergoing extraordinary upheaval. Over the last few decades, technology and regulatory change have profoundly altered how equities are traded, moving the market from a manual, human-driven system where trading volume for a given stock was largely concentrated in a single venue to today's "open architecture" system in which trading is automatized and electronic, and transactions in a company's stock potentially occur across a huge number of trading venues of differing types. 3 The approval of IEX's application to become the nation's newest stock exchange, including its famous "speed bump," was one of the SEC's most controversial decisions in decades.4 Other exchanges have proposed a raft of new innovations in its wake. 5 Yet while the market has changed dramatically, the regulatory regime has remained largely the same. This Symposium paper focuses on a major piece of that system that seems especially creaky- the regulation of trading venues-and the sharp regulatory distinctions current law draws among different kinds of marketplaces. Specifically, the central argument of this paper is that a series of functional trends have weakened the case for our current venue categorization system and strengthened the case for moving toward a single regulatory status for trading venues. It then considers possible reforms of market structure.

Current law creates two distinct regulatory statuses for equity trading venues. First, there are stock exchanges, which the law regulates as self-regulatory organizations (SROs), whose rules are subject to SEC scrutiny and approval, and enjoy absolute immunity from private suit when pursuing their regulatory functions.6 All other venues are regulated as broker-dealers, and can be broken down further as either alternative trading systems (ATSs) (which meet the statutory definition of an exchange but enjoy an exemption), or non-ATS non-exchange venues. The law freights the distinction between exchange and broker-dealer with considerable regulatory baggage for historical reasons, distinguishing pointedly between exchanges as SROs and all other venues as ordinary broker-dealers. The emphasis here will be on the way in which a variety of trends-some newer than others- undermine the case for these sharp legal distinctions among venues.

In this Introduction, we will very briefly sketch these trends and why they erode the current regulatory scheme's logic. First, ATSs have taken on increasing importance. They perform many of the same social functions as exchanges have traditionally performed and many have a trading structure that in many regards functions just like an exchange.7 Moreover, transaction volume on ATSs has been increasing significantly. Second, stock exchanges increasingly offer services designed to mimic sophisticated trading strategies- a role once reserved for traditional brokers executing orders for their institutional clients.8 In essence, many broker-dealers are looking more like exchanges, and many exchanges arc providing services previously provided only by broker-dealers. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Stock Market Futurism
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.