Scope of chapter

This chapter considers the role of stock exchanges in performing regulatory and supervisory functions relating to issuers. One reason why this issue has come into the foreground of policy discussions is because of the evolution of exchanges from organisations with tightly controlled member ownership into companies with shares that can be freely traded. Historically, even though some exchanges had the formal organisational structure of private sector bodies, they were seen as quasi-public bodies and the notion that stock exchanges would discharge public interest responsibilities was part of the everyday fabric of securities regulation. As organisations with the ownership structure of ordinary commercial companies, new-style exchanges must now embrace the objective of shareholder-value maximisation. This new shareholder-value orientation of exchanges and the increasingly competitive environment in which they now operate intensifies debate about the willingness of exchanges to carry out regulatory responsibilities in the public interest and also about whether, or to what extent, it is appropriate for them to do so.

The EU market integration agenda gives a distinctive character to European debate about exchange-based regulation and supervision of issuers. According to the influential Lamfalussy Report, the number and diversity of organisations involved in EU securities regulation is a barrier to the achievement of a fully-integrated market. Europe still has a lot of stock exchanges and there are even some proposals to establish new ones. The market integration perspective thus provides an additional reason to question the merits of exchanges as regulators and supervisors of issuers.