The Relevance of Public Law to Private Ordering: The Consequences of Uncertain Judicial Review for Stock Exchange Self-Regulation

Abstract

Self-regulation relies on private ordering, whereby private actors make and enforce rules governing their conduct. Private ordering is not outside the reach of public law principles, making the certainty of private ordering dependent on the predictability of whether public law principles apply. This article examines the London Stock Exchange’s self-regulation of AIM (Alternative Investment Market), arguing that doctrinal uncertainty over the availability of judicial review undermines private ordering by hindering informed ex ante bargaining and contracting. Public law uncertainty imposes transaction costs on self-regulatory actors who must reappraise or revise their contracts to account for unpredictable public law obligations, such as when the LSE doubled the length of the AIM Disciplinary Handbook in 2018 following an unsuccessful claim for judicial review. This article concludes that regulation on AIM does not likely possess a sufficiently public character to be amenable to judicial review, which is also desirable because it would increase certainty of contracting in the financial system and prevent market participants and third parties from mistakenly assuming procedural fairness protections that courts may deny.

Keywords: judicial review, self-regulation, private ordering, London Stock Exchange (LSE), Alternative Investment Market (AIM)

JEL Classification: G18, G28, K22, K23, 016