Licensing the Word on the Street: The SEC's Role in Regulating Information

Abstract

Information is said to be the lifeblood of financial markets. Securities markets rely on corporate disclosures, quotes, prices, and indices, as well as the market structures, products and standards that give them meaning, for the efficient allocation of capital. The availability of and access to such information on reasonable terms is one of the essential characteristics of strong financial markets. And yet because information is a commodity, policymakers must balance the desire to provide access to such public goods against the need to maintain appropriate incentives for information producers.

The Securities and Exchange Commission faces the primary challenge of regulating the balance between the commercial and social value of information in securities markets. In some areas, the Commission has all but extinguished private rights. In other areas, it has deferred to federal or state intellectual property doctrines. In yet other areas, the SEC has created intricate entitlements tailored to historical market structures. Against this backdrop, self-regulatory bodies, securities intermediaries, and other entities have staked out proprietary claims in their information products as permitted by state and federal law.

Today, with the demutualization of the New York Stock Exchange and the Nasdaq Stock Market, as well as the completed and impending mergers of various national and international exchanges, we are rapidly moving away from the paradigm of the dominant national exchange to the reality of competing national and global trading venues. These changes in securities market structure are likely to generate numerous disputes over the allocation of rights and interests in securities information. It is thus increasingly urgent that the Commission articulate some statement of policy to govern the regulation of information rights.

Keywords: Securities regulation, Market information, Stock indices, Self-regulation

JEL Classification: K22