Structure as an Independent Variable in Assessing Stock Market Failures
82 Pages Posted: 15 Dec 2003
Date Written: December 1, 2003
Abstract
The recent frontrunning by specialists on the New York Stock Exchange call for an explanation of why an institution thought to be efficient has flaws that permit this activity. The conclusion is that not only the NYSE, but the entire American securities market, is structured in a way that virtually automatically diverts rents to outsiders. Institutional theory and economic sociology reveal that market structure alone ensures rent transfers from retail investors to market professionals, regardless of the motivations of behavior of the latter. The theory is explained and additional uses suggested.
Keywords: securities, finance
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