Exchange Trading Rules and Stock Market Liquidity
43 Pages Posted: 14 Nov 2009
Date Written: October 21, 2009
In this paper, 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 effect liquidity.
Keywords: Market Manipulation, Liquidity, Insider Trading, Broker-Agency Conflict, Law and Finance
JEL Classification: G12, G14, G18, K22
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