The Self-Regulation of Commodity Exchanges: The Case of Market Manipulation

Chapter 2. Regulatory Competition

“…But these researchers also highlight the problem of enforcement: SRAs begin to adopt an aggressive stance only where there was perceived to be a threat of intervention by public agencies. The same phenomenon has been observed with the self-regulation of commodity exchanges (Pirrong, 1995;see also Page, 1987;Fishman, 1993;Black, 1997). Investigations of occupational health and safety systems, as they have increasingly shifted towards decentralised standard-setting by local arrangements between employers and employees, suggest this has been effective when the systems can be related to nationally established standards and are supported by knowledge that the arrangements will be enforced (Dawson et al, 1988).…”

“…We have seen (Baggott and Harrison, 1986;Pirrong, 1995) that the threat of state intervention may, to some extent, mitigate the harmful effects of monopolization. A useful analogy may here be drawn with the theory of contestable markets which indicates that, under certain conditions, efficient pricing and production can be forced upon a monopolistic supplier by the threat of competition, just as much as by actual competition (Baumol, Panzar and Willig, 1982).…”

Self-regulation

“…We have seen (Baggott and Harrison, 1986;Pirrong, 1995) that the threat of state intervention may, to some extent, mitigate the harmful effects of monopolisation. A useful analogy may here be drawn with the theory of contestable markets which indicates that, under certain conditions, efficient pricing and production can be forced upon a monopolistic supplier by the threat of competition, just as much as by actual competition (Baumol, Panzar and Willig, 1982).…”

Coming Clean and Cleaning Up: Does Voluntary Self-Reporting Indicate Effective Self-Policing?

“…While some research on voluntary regulation has suggested that firms can reduce the harmful effects of their activities by adopting internal compliance management practices (Innes and Sam 2008;Khanna and Damon 1999;Sam, Khanna and Innes 2009), other studies suggest that, on average, purportedly self-regulating firms do not measurably improve their performance (Alberini and Segerson 2002;Darnall and Sides 2008;Ebenshade 2004;Koehler 2007;Lyon and Maxwell 2007;Pirrong 2000;Pirrong 1995;Rivera, de Leon and Koerber 2006;Vidovic and Khanna 2007;Welch, Mazur and Bretschneider 2000) and sometimes actually perform worse than their non-self-regulating counterparts (King and Lenox 2000;Rivera, de Leon and Koerber 2006). Because firms' internal self-policing practices are not readily observable, regulators may not be able to distinguish effective from ineffective self-policers.…”

“…Similarly, the EPA recently shut down Performance Track, its flagship voluntary program, after media reports charged that the program was nothing more than a "public relations charade" (Shiffman, Sullivan and Avril 2009: A1). Academic research likewise suggests a cautious approach to self-regulation, with most studies finding no evidence that self-regulation programs improve regulatory compliance (Ebenshade 2004;Pirrong 2000;Pirrong 1995;Vidovic and Khanna 2007;Welch, Mazur and Bretschneider 2000) and some documenting worse performance by firms purporting to engage in self-regulation than by those not making such claims (King and Lenox 2000;Rivera, de Leon and Koerber 2006). This article investigates whether the mechanism of coupling voluntary self-reporting with a commitment to self-police can overcome some of the demonstrated limitations of other voluntary regulation approaches.…”