Stock exchanges and stock exchange law


Stock exchanges and stock exchange law are in a relationship of mutual
impact. In theory, stock exchange law has the greater influence because policymakers can employ it to shape the exchanges and their surroundings. History reveals, however, that events in practice have more frequently prompted
reactions by policymakers than the other way around. As overzealous legislative activity in other areas shows, this is a sensible approach that should be
safeguarded against hasty reactions of the type that could be observed during
the recent crisis on the financial markets.
Looking ahead, it seems likely that it is not the particulars of stock exchanges and stock exchange law that will dominate the debate among policymakers, regulators, and scholars, but instead the question of whether stock
exchanges and stock exchange law have any future at all. The dramatic loss of
market share and the ever-increasing role of competing trading facilities show
that many of the exchanges’

 functions may now be carried out by other marketplaces. While, accordingly, the regulation of those new venues gains more
and more importance, the traditional canon of stock exchange law has lost
much of its former relevance in practice. For many observers, stock exchange
law has passed its zenith as a regulatory concept and is today understood
merely as a part of capital markets or securities law. This shift is visible in
many European jurisdictions: In France and in the United Kingdom, the
operation of exchanges is regulated as one financial service among many.220
Germany still has an Exchange Act, but it has become a “limbless torso,”
which, since its first enactment (1896), has lost many of its limbs to the Secu-

220 Loi 2000-1223 du 14 décembre 2000 de code monétaire et financier, at art. L 421-26;
Financial Services and Markets Act, 2000 at §§ 285-313.

(2013) Stock Exchange Law 559
rities Trading Act and other laws.
Five years ago, we were skeptical that stock exchange law had a future at
all.222 In the meantime, though, both the practice of trading as well as the
regulatory environment have changed. The fragmentation of markets has
considerably increased, and stock exchanges are no longer the place where
traders conduct most of their transactions. On many markets, algorithms are
now the driving force, with orders placed and canceled in fractions of a second. Both developments—fragmentation and automation—challenge the
traditional regulatory regime because they threaten one of the exchanges’ core
functions: to concentrate and to standardize trading so that supply and demand will be matched at “fair” prices. If policymakers feel the need to intervene, the result may be provisions that are genuinely ‘stock exchange law.’
Even if those rules will be part of a more general approach in the area of
capital markets or securities law, it is not beyond imagination that they will be
dubbed ‘stock exchange law’ in the traditional meaning, and in any event, they
will be ‘stock exchange law’ in a functional sense. In light of these recent
developments, it does not seem too far-fetched to assume that the long history of stock exchange law is about to enter into a new era

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