Competition among Exchanges and Enforcement Policy

Caglio, Cecilia; Pescatori, Andrea

doi:10.5089/9781475516784.001

Cited by 7 publications

(5 citation statements)

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“…Caglio and Pescatori have also argued that demutualization could lead to conflicts of interest. In their opinion, ‘the evolution of market centers from mutually-owned to profit-driven competitors has raised concerns that the conflict of interest between their regulatory function and their business operations could trigger a race to the bottom in market surveillance in order to attract trading activity and minimize regulatory cost’ (Caglio and Pescatori, 2013: 3). These concerns seem to be founded given the fact that the cardinal motive of a demutualized exchange is to make profit and ensure that shareholders get maximum returns for their investments (Hughes, 2002b: 169).…”

Section: Conflict Of Interest and Demutualizationmentioning

confidence: 99%

The new kid on the block

Ubochioma

2016

Common Law World Review

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Since early 1990s, demutualization of stock exchanges has become a global trend. Recently, the Securities and Exchange Commission of Nigeria expressed the intention of Nigeria to join the global trend with the passage of the Securities and Exchange Commission Rules on Demutualization of 2015. This paper examines demutualization policy in Nigeria with particular reference to the issue of conflict of interest. It argues that conflict of interest in the post-demutualization era in Nigeria could be appropriately managed through the co-regulatory approach that is practised under the mutual structure, albeit with some reforms. The paper suggests two major reforms. First, the self-regulatory function of exchanges should be restructured in such a way that the role of exchanges as market operators would be distinct from their role as market regulators. Second, the regulatory role of the Securities and Exchange Commission should be expanded to include the power to appoint members of the board of management of a demutualized exchange; regulation of self-listing of a demutualized exchange; and adjudication of conflicts where the commercial interest of a demutualized exchange conflicts with that of a listed entity on the exchange. The paper further argues that such regulatory system would not only enhance the front-line regulatory responsibility of demutualized exchanges, but also ensure a balanced approach to regulation of conflicts of interest in post-demutualization era in Nigeria’s securities market.

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Section: Conflict Of Interest and Demutualizationmentioning

confidence: 99%

The new kid on the block

Ubochioma

2016

Common Law World Review

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“…Our research also contributes directly or indirectly to several other areas of academic research. For example, we introduce a new dimension to the analysis of competition between exchanges, other aspects of which have been considered by authors such as Arnold, Hersh, Mulherin, and Netter (1998), Santos and Scheinkman (2001), Bessembinder (2003) and Parlour (2004) and Caglio and Pescatori (2012). Our results have immediate implications for the "Stealth Trading" literature, which implicitly assumes the main motivation to break up larger trades into smaller trades is to camouflage informed trading (see Barclay and Warner (1993), Chakravarty (2001), Choe and Hansch (2006)).…”

Section: Third Between August 2005 and May 2006 Six Exchanges And Tmentioning

confidence: 99%

“…7 and C generated net income of approximately $155 Million, $100 Million, and $138 Million, respectively, for a total of approximately $394 Million. 9 For most of the exchanges, market data revenues constitute somewhere between 10% and 20% of total revenues.…”

Section: Institutional Background a Consolidated Data Plans And Revmentioning

confidence: 99%

Equity Trading and the Allocation of Market Data Revenue

Caglio

Mayhew²

2012

FEDS

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Revenues generated from the sales of consolidated data represent a substantial source of income for U.S. stock exchanges. Until 2007, consolidated data revenue was allocated in proportion to the number of reported trades. This allocation rule encouraged market participants to break up large trades and execute them in multiple pieces. Exchanges devised revenue-sharing and rebate programs that rewarded order-flow providers, and encouraged algorithmic traders to execute strategies involving large numbers of small trades. We provide evidence that data revenue allocation influenced the trading process, by examining trading activity surrounding various events that changed the marginal data revenue per trade.

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“…For example, in 2004, Networks A, B, and C generated net income of approximately $155 Million, $100 Million, and $138 Million, respectively, for a total of approximately $394 Million. 9 For most of the exchanges, market data revenues constitute somewhere between 10% and 20% of total revenues. Tape Revenue is allocated across market centers according to formulas established under the regulatory jurisdiction of the SEC.…”

Section: Institutional Background a Consolidated Data Plans And Revenue Allocationmentioning

confidence: 99%

“…Our research also contributes directly or indirectly to several other areas of academic research. For example, we introduce a new dimension to the analysis of competition between exchanges, other aspects of which have been considered by authors such as Arnold, Hersh, Mulherin, and Netter (1998), Santos and Scheinkman (2001), Bessembinder (2003), Foucault and Parlour (2004) and Caglio and Pescatori (2012). Our results have immediate implications for the "Stealth Trading" literature, which implicitly assumes the main motivation to break up larger trades into smaller trades is to camouflage informed trading (see Barclay and Warner (1993), Chakravarty (2001), Choe and Hansch (2006)).…”

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confidence: 99%