Conflicts of Interest in Self-Regulation : Can Demutualized Exchanges Successfully Manage Them?
The author examines the implications of demutualization of financial exchanges for their roles as self-regulatory organizations. Many regulators and exchanges believe that conflicts of interest increase when exchanges convert to for-profit business...
| Main Author: | |
|---|---|
| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2003/12/5278814/conflicts-interest-self-regulation-can-demutualized-exchanges-successfully-manage http://hdl.handle.net/10986/17428 |
| Summary: | The author examines the implications of
demutualization of financial exchanges for their roles as
self-regulatory organizations. Many regulators and exchanges
believe that conflicts of interest increase when exchanges
convert to for-profit businesses. Demutualization also
changes the nature of an exchange's regulatory role as
broker-dealers' ownership interests are reduced. These
factors are leading to reduced regulatory roles for
exchanges in many jurisdictions. The resulting changes have
significant implications for regulation of financial
markets, especially as exchanges are the only
self-regulating organizations (SROs) in most countries.
Major changes in the role of exchanges require a rethinking
of the allocation of regulatory functions and the role of
self-regulation, as well as stronger mechanisms to mitigate
conflicts of interest. Carson looks at the views of both
exchanges and regulators on these issues in Asian, European,
and North American jurisdictions where major exchanges have
converted to for-profit businesses. He finds that views on
the conflicts of interest faced by demutualized exchanges
vary widely. In addition, the tools and processes used by
exchanges and regulators to manage conflicts also differ
significantly across jurisdictions. The author concludes
that new and greater conflicts result from demutualization
and canvasses the regulatory responses in the jurisdictions examined. |
|---|