Abstract and Keywords
High-frequency trading, dark pools, front-running, phantom orders, short selling—the way securities are traded ranks high among today’s regulatory challenges. Thanks to a steady stream of news reports, investor complaints, and public investigations, it has become commonplace, both in financial and academic circles, to call for the government to intervene and impose order. From a historical and comparative perspective, however, many of the recent developments look less dramatic than some observers believe. This is the quintessence of the present Chapter. It explains how today’s regulatory regime evolved, identifies the key rationale for governments to intervene, and analyses the rules, regulators, and techniques of the world’s leading jurisdictions. The Chapter’s central argument is that governments should focus on the price formation process and ensure that it is purely market-driven. Local regulators and self-regulatory organizations will take care of the rest.
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