قوانین تجارت ارز و نقدینگی بازار سهام
|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|13712||2011||21 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Financial Economics, Volume 99, Issue 3, March 2011, Pages 651–671
We examine stock exchange trading rules for market manipulation, insider trading, and broker–agency conflict, across countries and over time, in 42 stock exchanges around the world. Some stock exchanges have extremely detailed rules that explicitly prohibit specific manipulative practices, but others use less precise and broadly framed rules. We create new indices for market manipulation, insider trading, and broker–agency conflict based on the specific provisions in the trading rules of each stock exchange. We show that differences in exchange trading rules, over time and across markets, significantly affect liquidity.
Stock exchanges around the world invest considerable manpower, technological effort, and financial resources to curb market manipulation and promote market efficiency and integrity (Aitken and Siow, 2003, Avgouleas, 2005 and Comerton-Forde and Rydge, 2006). It is widely regarded that securities law (La Porta et al., 1998, La Porta et al., 2006 and Jackson and Roe, 2009) and market microstructure (Harris, 2002 and Harris et al., 2009) play an important role in the development of stock markets around the world. Despite these important developments in the literature, a dearth of attention has been paid to the differences across exchanges with respect to the treatment of market manipulation within their trading rules. In this paper, we show international differences in trading rules for stock or equity exchanges, and we examine the impact of market integrity rules on the performance of equity marketplaces. Specifically, we study the differences in regulation across 42 exchanges worldwide during the time period of 2006–2008 and then proceed to investigate whether integrity-related exchange trading rules matter for market liquidity. For the purposes of this article, trading rules refer to the rules and regulations that regulate the activities within a stock market and the conduct of its participants, namely, the exchange and the members of the stock exchange who agree to be bound by such rules and regulations. We create new indices for trading rules pertaining to market manipulation, insider trading, and broker–agency conflict for these 42 stock exchanges in both developed and emerging markets. For the purposes of this article, market manipulation refers to the trading practices that distort prices and enable manipulators to profit at the expense of other market participants. Insider trading refers to acting on material nonpublic information. Broker–agency conflict refers to the actions that brokers could take while acting as the agent of a client that benefits the broker (or some other affiliated party) at the expense of the client or the market more generally. Some stock markets such as Nasdaq have extremely detailed rules that explicitly prohibit specific manipulative practices and broker–agency conflict, as well as rules that are designed to curtail the presence of insider trading. For example, Nasdaq's rules provide detailed provisions regarding wash trades, pre-arranged trading, fictitious orders, giving-up priority, churning, front-running, and a variety of other types of practices that constitute market manipulation. Other exchanges are less precise and have broadly framed rules regarding what constitutes market manipulation or broker–agency conflict. In view of the significant differences in the way trading rules regulate market manipulation, insider trading, and broker–agency conflict across countries and over time, it is worth considering whether these differences matter. To this end, in addition to showing the differences in trading rules and developing new indices of market surveillance, we examine whether the differences in trading rules can help to explain the differences in liquidity among exchanges. Specifically, we examine whether a correlation between trading rules exists and a series of liquidity measures that include velocity, volatility, and relative bid-ask spread. The primary function of a marketplace is to provide liquidity to market participants. The effectiveness of an exchange is affected by its rules that regulate security transactions. We consider two competing hypotheses regarding the impact of trading rules on liquidity. On the one hand, one can argue that vague regulations create inefficiency as investors and traders are not clear as to which activities are acceptable and which ones are in breach of the rules. Detailed rules, therefore, could give rise to greater investor confidence, provide greater dissemination of knowledge about prohibited conduct, and facilitate invigilation of such rules, which in turn might reinforce investor confidence in the marketplace. As a result, these rules might help to improve trading activity, reduce uncertainty, and decrease trading cost. On the other hand, one could argue that detailed regulations create inefficiency as investors and traders are able to take advantage of inevitable loopholes and, if so, more detailed exchange rules could have a negative effect on liquidity. Although exchanges do not amend their rules very frequently, amendments to rules are instituted over time. Most notably for European exchanges, in November 2007 the Directive on Markets in Financial Instruments (MiFID) became effective and thereby gave rise to more detailed rules and more transparent investor protection for the European exchanges. Although some European exchanges, such as the London Stock Exchange, already had in place trading rules that were analogous to the new rules in MiFID, others such as the Austrian exchange had significantly less detailed rules prior to MiFID. Because the introduction of MiFID affects only the countries of the European Union, it creates a natural experimental setting in which to assess the impact of exchange rule restrictions on trading activity. In this article, we exploit this setting to shed light on our research question by examining the dynamics of the market liquidity measures between the two groups of exchanges around the introduction of MiFID. Because MiFID is introduced as a major part of the European Union’s Financial Services Action Plan (FSAP) instead of as a result of one single jurisdiction’s need to improve regulation, endogeneity issues that relate rule changes to market outcomes are minimized in our experimental setting. The data presented in this article show a strong and robust effect of trading rules on liquidity. Detailed trading rules are positively associated with velocity and negatively associated with volatility and bid-ask spreads. We show this effect with panel data that vary across time and countries by considering a variety of robustness checks that include, but are not limited to, fixed effects modeling and difference-in-differences tests. To isolate the influence of the trading rules, we also control for a number of plausible factors that could effect trading activity based on prior academic works, including exchange institutional features (Röell, 1992), market microstructure aspects (Stoll, 2000), and international differences in securities regulation (La Porta et al., 2006 and Jackson and Roe, 2009), among other things. The effect of rules on liquidity is robust to controls for economic, legal, and institutional differences across exchanges that might have been correlated with country specific differences in the drafting of trading rules. This strong evidence is due to the fact that exchanges that specifically recognize and prohibit certain acts in the marketplace enhance investor confidence. As well, exchanges with more specific rules invariably have residual catch-all clauses that explicitly outline the spirit of the rules and regulations and prohibit a vaguely defined "any other type of manipulative activity" such that (arguably) there is scant scope for exploiting potential loopholes. A few recent articles are closely related to our own. La Porta, Lopez-de-Silanes, and Shleifer (2006) and Jackson and Roe (2009) show that securities law matters for facilitating stock market development in 49 exchanges around the world. Aitken and Siow (2003) provide a ranking of exchanges based on efficiency and integrity. Cumming and Johan (2008) provide survey evidence that surveillance technology and information sharing facilitate market integrity. Hail and Leuz (2006), Daske, Hail, Leuz, and Verdi (2008) and Lampert, Leuz, and Verracchia (2007) show that stronger securities law, accounting rules, and stricter enforcement mechanisms lower firms’ cost of capital. The findings in these articles are consistent with a broader literature on the importance of securities regulation and market surveillance for market efficiency and integrity.1 More generally, our article contributes to the general question of the value of broadly framed versus specific rules in regulating markets and society (see, e.g., Ferguson and Peters, 2003 and Stevenson, 2005). We provide a novel source of information for understanding international differences in stock exchanges. We show that stock exchange trading rules, which specify in detail rules that pertain to market manipulation, facilitate trading activity. The implication is that an exchange’s trading rules are an important source of international differences in stock markets. This information is very transparent and readily visible for use in future research. An index of exchange trading rules is provided herein. The paper is organized as follows. Section 2 describes stock exchange trading rules and the creation of an index for exchange surveillance. The data are introduced in Section 3. Section 4 presents multivariate analyses of the relation between the exchange surveillance index and trading activity. Concluding remarks follow in the last section.
نتیجه گیری انگلیسی
In this paper, we contribute to the literature on international differences in stock exchanges by examining the effect of trading rules on liquidity as represented by velocity, volatility, and bid-ask spread. Building on prior work on mandatory disclosure and delegation between private and public enforcement of securities laws ( La Porta, Lopez-de-Silanes, and Shleifer, 2006; Hail and Leuz, 2006; Jackson and Roe, 2009 ) and surveillance technology and information sharing in ex post enforcement ( Cum- ming and Johan, 2008 ), we consider the interaction between rule specificity in stock exchange trading rules and stock exchange trading activity.We employ a sample of 42 exchanges around the world and find that stock exchange trading activity is most closely related to trading rules specificity in regard to insider trading and market manipulation but is not statistically related to rules pertaining to broker–agency conflict. The reasoning behind this finding is that insider trading and market manipulation rules provide clarity regarding prohibited manipulative trading practices and are of direct and central importance to the conduct of market participants. By contrast, broker–agency conflict rules are typically subject to extraneous rules from governing bodies and professional associations for brokers (such as the Chartered Financial Analysts Institute). The connection between trading activity and insider trading and market manipulation rules is robust to concerns about endogeneity, difference-in-differences specifica- tions, and alternative control variables. Specifically, we observe the material impact of the MiFID rule changes on all dimensions of liquidity. Although it is difficult to isolate precisely the components of trading rules that matter the most, it is noteworthy that we do observe a close connection between the Volume Manipulation Rules Index and trading velocity, the Price Manipulation Rules Index and volatility, and the Insider Trading Rules Index and bid-ask spreads. The results indicate trading rules are an important source of information to consider in explaining the differences in trading activity among stock exchanges around the world. Future work could look to the exchange trading rules as a source of international differences in stock exchange efficiency and integrity