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Competition among Exchanges and Enforcement Policy / Cecilia Caglio, Andrea Pescatori.
- Format:
- Book
- Government document
- Author/Creator:
- Caglio, Cecilia.
- Series:
- IMF Working Papers; Working Paper ; No. 2013/037
- IMF Working Papers
- Language:
- English
- Subjects (All):
- Stock exchanges--Econometric models.
- Stock exchanges.
- Stock exchanges--Management.
- Physical Description:
- 1 online resource (32 p.)
- Place of Publication:
- Washington, D.C. : International Monetary Fund, 2013.
- Language Note:
- English
- Summary:
- In this paper, we explore how competition among stock exchanges, operated as self-regulatory organizations (SROs), affects the design of their members' surveillance. We develop a model where two for-profit SROs compete for trading volume, while brokers execute transactions on behalf of the investors and may misreport the true cash flow. The SROs can deter a fraud by announcing an investigation and imposing a monetary penalty.The success of the investigation depends upon both the amount of resources devoted to monitoring and the efficiency of monitoring technologies. We show that when contracts are incomplete and investors do not have perfect information about the monitoring efficiency, competition among exchanges induces a race to the bottom in enforcement policy and a reduction in total welfare, compared to the case of a monopolist SRO.
- Contents:
- Cover; Contents; I. The Model; A. Investors and Brokers; B. The SROs; C. The Timing; D. The Broker-Investor Contract: General Results; II. The Race to the Bottom; A. The Investor Problem; B. The Broker Problem; C. The SRO Problem and the Equilibrium; 1. The Monopolist Solution; III. Fraud and Market Participation; A. The Investor Problem; B. The Broker's misconduct; C. The SRO Problem and Equilibrium; 1. The Monopolist Solution under Incomplete Contracts; Tables; 1. Monopoly vs. Competition; IV. Extension: Sophisticated Investor; A. Homogenous Sophisticated investors; V. Conclusions
- A. Appendix 1B. Appendix 2; 1. The SROs' Problem; 2. Naive vs Sophisticated; Figures
- Notes:
- "Research Department."
- "February 2013."
- Description based on print version record.
- ISBN:
- 9781475569032
- 1475569033
- 9781475520002
- 147552000X
- 9781299265141
- 1299265146
- 9781475583700
- 1475583702
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