American Law and Economics Review Advance Access originally published online on July 24, 2008
American Law and Economics Review 2008 10(2):454-506; doi:10.1093/aler/ahn009
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Global Market Surveillance*
York University
University of Tilburg
Send correspondence to: Douglas Cumming, Associate Professor and Ontario Research Chair, Schulich School of Business, York University, 4700 Keele Street, Toronto, Ontario M3J 1P3, Canada; E-mail: Douglas{at}Cumming.com or Sofia Johan, University of Tilburg, AFM Senior Research Fellow, Tilburg Law and Economics Centre (TILEC), Postbus 90153, 5000 LE Tilburg, The Netherlands; E-mail: sofiajohan{at}email.com.
JEL Classification: G12, G14, G18, K22
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Abstract |
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This paper provides evidence on market surveillance from exchanges and securities commissions from twenty-five jurisdictions in North, Central and South America, Western and Eastern Europe, Africa, and Asia. Exchanges as SROs engage in a greater range of single-market surveillance of market manipulative practices than securities commissions, but the scope of cross-market surveillance activity is very similar among exchanges and securities commissions. Cross-market surveillance is more effective with information-sharing arrangements, and securities commissions are more likely to engage in information sharing than exchanges are. Relative to the scope of single-market surveillance, the scope of cross-market surveillance shows a stronger positive association with trading velocity, the number of listed companies, and market capitalization. The data also indicate that as at 2005, there is ample scope for jurisdictions to expand their cross-market surveillance and thereby stimulate investor confidence and trading activity.
* We owe thanks to Michael Aitken, Doug Harris, Maureen Jensen, Rosemary Luo, and Mike Prior and the seminar participants at the SMARTS Surveillance Conference (Stockholm, October 2005), DeGroote School of Business, McMaster University (Hamilton, September 2006), the Canadian Law and Economics Association Annual Conference (Toronto, September 2006), Regulation Services/DeGroote Conference on Market Integrity (Toronto, November 2006), the Asian Law and Economics Association Annual Conference (Bangalore, December 2006), and the American Law and Economics Association Annual Conference (Harvard Law School, May 2007) for helpful comments and suggestions. We are also indebted to Regulation Services, Inc. (Toronto), Capital Markets CRC (Sydney), and the Paolo Baffi Research Center (Milan) for financial support, and to various staff at Capital Markets CRC, NASD, Regulation Services, SMARTS Group, and various surveillance staff at stock exchanges and securities commissions around the world for helpful comments.