Exchange Trading Rules and Stock Market Liquidity

41 Pages Posted: 2 Feb 2010 Last revised: 2 Mar 2010

See all articles by Douglas J. Cumming

Douglas J. Cumming

Florida Atlantic University

Sofia Johan

Florida Atlantic University - Finance; Tilburg Law and Economics Center (TILEC)

Dan Li

The University of Hong Kong - School of Economics and Finance

Multiple version iconThere are 2 versions of this paper

Date Written: February 1, 2010

Abstract

In this article, 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 affect liquidity.

Keywords: Market Manipulation, Liquidity, Insider Trading, Broker-Agency Conflict, Law and Finance

JEL Classification: G12, G14, G18, K22

Suggested Citation

Cumming, Douglas J. and Johan, Sofia A. and Li, Dan, Exchange Trading Rules and Stock Market Liquidity (February 1, 2010). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=1545988

Douglas J. Cumming (Contact Author)

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://booksite.elsevier.com/9780124095373/

Sofia A. Johan

Florida Atlantic University - Finance ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Dan Li

The University of Hong Kong - School of Economics and Finance ( email )

Shenzhen
China

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