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Self-regulation in securities markets

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  • Carson, John

Abstract

This paper canvasses the trends in self-regulation and the role of self-regulation in securities markets in different parts of the world. The paper also describes the conditions in which self-regulation might be an effective element of securities markets regulation, particularly in emerging markets. Use of self-regulation and self-regulatory organizations is often recommended in emerging markets as part of a broader strategy aimed at improving the effectiveness of securities regulation and market integrity. According to the International Organization of Securities Commissions, reliance on self-regulation is an optional feature of a regulatory regime. Self-regulatory organizations may support better-regulated and more efficient capital markets, but the value of self-regulation is again being questioned in many countries. Forces such as commercialization of exchanges, development of stronger statutory regulatory authorities, consolidation of financial services industry regulatory bodies, and globalization of capital markets are affecting the scope and effectiveness of self-regulation -- and in particular the traditional role of securities exchanges as self-regulatory organizations.The paper reviews different models of self-regulation, including exchange self-regulatory organizations, member (or independent) self-regulatory organizations, and industry or dealers’ associations. It draws on examples of self-regulatory organizations from many markets to illustrate the degree of reliance on self-regulation, as well as the range of functions for which self-regulatory organizations are responsible, in markets around the world. Issues that are important to the effective operation of self-regulatory organizations are discussed, such as corporate governance, managing conflicts of interest, and regulatory oversight by government authorities.

Suggested Citation

  • Carson, John, 2011. "Self-regulation in securities markets," Policy Research Working Paper Series 5542, The World Bank.
    • Handle: RePEc:wbk:wbrwps:5542
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    References listed on IDEAS

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    1. de Luna Martinez, Jose & Rose, Thomas A., 2003. "International survey of integrated financial sector supervision," Policy Research Working Paper Series 3096, The World Bank.
    2. Carson, John W., 2003. "Conflicts of interest in self-regulation : can demutualized exchanges successfully manage them?," Policy Research Working Paper Series 3183, The World Bank.
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    Cited by:

    1. Anand, Anita & Green, Andrew, 2018. "Securities settlements as examples of crisis-driven regulation," International Review of Law and Economics, Elsevier, vol. 55(C), pages 41-57.
    2. Edward J. Balleisen, 2017. "American Better Business Bureaus, the Truth-in-Advertising Movement, and the Complexities of Legitimizing Business Self-Regulation over the Long Term," Politics and Governance, Cogitatio Press, vol. 5(1), pages 42-53.
    3. Chang Ma, 2020. "Self-regulation versus government regulation: an externality view," Journal of Regulatory Economics, Springer, vol. 58(2), pages 166-183, December.
    4. Silvester Koten, 2021. "Self-regulation and governmental oversight: a theoretical and experimental study," Journal of Regulatory Economics, Springer, vol. 59(2), pages 161-174, April.

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    More about this item

    Keywords

    Debt Markets; Regulatory Regimes; Public Sector Regulation; Emerging Markets; Markets and Market Access;
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