Linking the Securities Market Structure and Capital Formation: Incentives for Market Makers?

Abstract

This Article analyzes various incentives for market makers as a potential regulatory tool to address the interrelated crises in capital formation and market making in smaller-cap stocks. While considering the nature and development of the market making crisis and its impact on capital formation, such approaches as incentives for market makers conferring advantages in the trading process itself and issuer-to-market maker compensation arrangements are evaluated. The Article also addresses the significance of the integrated model of market making.

Keywords: market makers, capital formation, incentives, compensation arrangements

JEL Classification: D62, G18, G24, K22