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Demutualization and enforcement incentives at self-regulatory financial exchanges

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  • Reiffen, David
  • Robe, Michel A.

Abstract

In the last few years, many of the world's largest financial exchanges have converted from mutual, not-for-profit organizations to publicly-traded, for-profit firms. In most cases, these exchanges have substantial responsibilities with respect to enforcing various regulations that protect investors from dishonest agents. We examine how the incentives to enforce such regulations change as an exchange converts from mutual to for-profit status. In contrast to oft-stated concerns, we find that, in many circumstances, an exchange that maximizes shareholder (rather than member) income has a greater incentive to aggressively enforce these types of regulations.

Suggested Citation

  • Reiffen, David & Robe, Michel A., 2008. "Demutualization and enforcement incentives at self-regulatory financial exchanges," CFS Working Paper Series 2008/44, Center for Financial Studies (CFS).
  • Handle: RePEc:zbw:cfswop:200844
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    References listed on IDEAS

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    More about this item

    Keywords

    Demutualization; Ownership Structure; Regulation of Financial Institutions; Enforcement Delegation; Customer Protection Rules;

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law

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