IDEAS home Printed from
   My bibliography  Save this article

An Informal Perspective on the Economics and Regulation of Securities Markets


  • Chester S. Spatt

    () (Tepper School of Business, Carnegie Mellon University and National Bureau of Economic Research, Pittsburgh, Pennsylvania 15213)


This review uses an economic lens to offer perspectives on securities regulation. We discuss several motives for regulation and highlight some facets of regulatory conflict, competition, and coordination as well as the range of required securities market disclosures. We discuss the roles of economics and cost-benefit analysis in regulation under administrative law as well as “counting” and “line-drawing” exercises and the nature of the “unintended consequences” of regulation. Among the specific examples of securities regulation that the review highlights using economic principles are short-sale regulation (including the economic costs associated with short interest) and enforcement sanctions against corporations. We also note some of the successes (options backdating) and failures (Madoff and mutual fund market timing) of the securities regulator in identifying new enforcement challenges. This review concludes by highlighting the importance of regulatory uncertainty and time-consistent policies and applies this principle to several contexts related to the financial crisis.

Suggested Citation

  • Chester S. Spatt, 2010. "An Informal Perspective on the Economics and Regulation of Securities Markets," Annual Review of Financial Economics, Annual Reviews, vol. 2(1), pages 127-143, December.
  • Handle: RePEc:anr:refeco:v:2:y:2010:p:127-143

    Download full text from publisher

    File URL:
    Download Restriction: Full text downloads are only available to subscribers. Visit the abstract page for more information.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item


    cost-benefit; disclosure; enforcement; rule-making; time consistency;

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:anr:refeco:v:2:y:2010:p:127-143. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ( General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.