Stock Exchange Demutualization and Self Regulation

Abstract

This article primarily discusses role of self regulation of stock exchanges in a demutualized environment. It has been argued that there are some genuine concerns about conflict of interest between the regulatory role of the stock exchange and its business interest as a corporate entity. Congruent with the business prudence of any corporate entity, it has been argued that argue that the effectiveness of self regulation is limited to the extent to which the exchange can internalize the cost of regulation. The conflict of interest underlying the activities of listing, supervision of market operation and business capacity planning has been exemplified and discussed in this article. Finally an attempt has been made to resolve the problem of conflict of interest in a generic manner.

Keywords: stock exchanges, demutualization, self regulation, conflict of interest, transaction cost

JEL Classification: G32, L14, L16, L21, L30