enabled increased institutional investor participation in equities which has proceeded largely through indexing. 102
One obvious advantage of the futures market is that it provides for regulatory competition between the SEC and the CFFC. The reporting systems of the CFFC seem almost instantaneous when compared with the gathering of data by the SEC. 103 Pursuant to the Market Reform Act, the SEC has proposed rules which would implement a large trader reporting system under the authority of § 13H of the Securities and Exchange Act of 1934, adopted as part of the Market Reform Act of 1990. Rule 13H-1 would establish an efficient, activity-based reporting system for gathering information about large traders and their trading activity. 104 The SEC was arguably spurred to do so by superior CFFC data.
Encouraging long-term major stakeholding by institutional investors would require a major overhaul of the financial services industry. Even though a capital gains tax for long-term holdings may cause investors to hold stocks for a longer period of time, it will not convince institutional investors to hold a large percentage stake. A tax advantage for companies that hold over a certain percentage (5 or 10%) is an alternative. A securities or derivative market transaction tax would disrupt the essence of markets. The same result could be achieved by higher futures margins.
Current intermarket regulation is successful to the extent that it is concerned with the mechanics of securities clearance and settlement. In fact, securities markets performed remarkably well in the 1987 break. When it comes to the more substantive issues, such as promoting investment through long term shareholding, regulatory and legislative initiatives have been lacking. Appropriate intermarket regulation ought to be directed to stemming systemic risk. A priority is the consolidated regulation of securities holding companies to the extent these companies engage in related unregulated securities, derivatives and forex business.