The Economics of Market Confidence:
(Ac)Costing Securities Market Regulations
Written by Jeffrey Lawrence
When discussing securities market regulations, the discourse has traditionally
been preoccupied with considerations of equal access to information,
transparent disclosure and shareholder rights. In recent times, however,
regulatory reviews performed by the Corporate Law Economic Reform Program
and the Office of Regulation Review have directed attention to the need
for efficient securities regulations which acknowledge the cost-benefit
trade-offs inherent in any regulatory structure. Notwithstanding this
growing awareness of regulatory costs, there still appears to be an
overwhelming tendency when considering securities regulation to equate
more stringent regulations with market maturity and, in particular,
improved investor confidence. This article adopts a number of economic
constructs to broaden the regulatory debate and it also raises a number
of concerns in relation to the existing regulatory framework and the
on-going regulatory debate. The main conclusions from this analysis
are that, firstly, macroeconomic performance matters more than regulatory
policy when it comes to establishing market confidence and, secondly,
that the regulatory costs associated with securities market regulations
may actually impede macroeconomic performance.
