Regulators monitor to ensure trading is fair insider

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Regulators monitor to ensure trading is fair. Insider trading and market manipulation are prohibited. However, Insider trading laws are hard to enforce, they have costs as well as benefits Brokers and money managers are regulated to protect investors. Organized markets are regulated to improve their performance. Major goal of regulation is market transparency. However, transparency has costs and benefits and were not sure if gov. intervention in this market is beneficial “continental approach” : civil-law legal systems relies on close oversight to prevent problems “Anglo” approach: common-law legal systems set standards and focuses on detecting and punishing abuse. Innovation is easier Globalization of markets is hindered by different regulations (harmonization and mutual recognition are two resolutions) Markets are subject to crashes which are like bank runs, however can stay in the securities market even when it crashes unlike deposits during a bank panic Noise trading= trading that isn’t liquidity or information trading. Ex. Trading during a crash Market instability results from- uncertainty about long-run value, limits on short selling, and noise trading. Quality cycles also contribute Policies to reduce instability include limiting buying on margin, restricting short sales, “Tobin taxes” and circuit breakers. Little evidence that any of these help Rather than preventing crashes, policy should focus on limiting damage when they do occur.
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