Demutualization and Customer Protection at Self-Regulatory Financial Exchanges

Journal of Futures Markets, Forthcoming

EFA 2007 Ljubljana Meetings Paper

42 Pages Posted: 1 Mar 2007 Last revised: 1 May 2010

See all articles by David Reiffen

David Reiffen

U.S. Commodity Futures Trading Commission (CFTC)

Michel A. Robe

University of Richmond - E. Claiborne Robins School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: December 27, 2009

Abstract

In the past decade, many of the world's largest financial exchanges have converted from mutual, not-for-profit organizations to publicly-traded, for-profit firms. In most cases, these exchanges have substantial responsibilities with respect to enforcing various regulations that protect investors from dishonest agents. We examine how the incentives to enforce such regulations change as an exchange converts from mutual to for-profit status. In contrast to oft-stated concerns, we find that, in many circumstances, an exchange that maximizes shareholder (rather than member) income has a greater incentive to aggressively enforce these types of regulations.

Keywords: Demutualization, Ownership structure, SRO, Regulation of financial exchanges, Enforcement delegation, Customer protection

JEL Classification: G28, D02, K23, L20

Suggested Citation

Reiffen, David and Robe, Michel A., Demutualization and Customer Protection at Self-Regulatory Financial Exchanges (December 27, 2009). Journal of Futures Markets, Forthcoming, EFA 2007 Ljubljana Meetings Paper, Available at SSRN: https://ssrn.com/abstract=967396

David Reiffen

U.S. Commodity Futures Trading Commission (CFTC) ( email )

Three Lafayette Centre
1155 21st Street, NW
Washington, DC 20581
United States

Michel A. Robe (Contact Author)

University of Richmond - E. Claiborne Robins School of Business ( email )

Richmond, VA 23173
United States

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