Venture Exchange Regulation: Listing Standards, Market Microstructure, and Investor Protection

Forthcoming in the Handbook on Law and Entrepreneurship, Gordon Smith, Christine Hurt & Brian Broughman eds., Cambridge Univ. Press 2018

University of Utah College of Law Research Paper No. 179

28 Pages Posted: 15 Sep 2016 Last revised: 9 Jul 2018

See all articles by Jeff Schwartz

Jeff Schwartz

University of Utah - S.J. Quinney College of Law

Date Written: July 8, 2018

Abstract

This chapter from the forthcoming Handbook on Law and Entrepreneurship (Gordon Smith, Christine Hurt & Brian Broughman eds.) sets out a template for the regulation of venture exchanges — securities markets specifically designed for trading smaller and younger firms.

I argue for listing standards that eliminate the smallest and youngest firms, and those where the listing exchange perceives a heightened risk of fraud. I also suggest that market microstructure rules should mandate fully transparent call-auction trading and limit trading to the listing exchange. Finally, I argue that the most efficient and effective way to protect investors is to deemphasize ex ante regulation, in particular, mandated disclosures, much of which retail investors would likely ignore, and instead emphasize ex post regulation, in particular, SEC enforcement of the rules against securities fraud, market manipulation, and insider trading.

Keywords: entrepreneurship, secondary markets, venture exchanges, crowdfunding, Regulation A, unicorns, liquidity, initial public offerings, IPOs, microstructure

Suggested Citation

Schwartz, Jeff, Venture Exchange Regulation: Listing Standards, Market Microstructure, and Investor Protection (July 8, 2018). Forthcoming in the Handbook on Law and Entrepreneurship, Gordon Smith, Christine Hurt & Brian Broughman eds., Cambridge Univ. Press 2018; University of Utah College of Law Research Paper No. 179. Available at SSRN: https://ssrn.com/abstract=2836725

Jeff Schwartz (Contact Author)

University of Utah - S.J. Quinney College of Law ( email )

383 S. University Street
Salt Lake City, UT 84112-0730
United States

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