Stock Exchanges at the Crossroads

Abstract

One of the foremost icons of capitalism is at a crossroads: the stock exchange. Ever since the first days of organized trading, stock exchanges had been owned and managed by their traders. Now, half a millennium later, those days are over. All of a sudden, stock exchanges are compelled to abandon their traditional structure, invite outside investors, and become publicly traded corporations (a process known as "demutualization"). In the future, everyone will be able to own a piece of a stock exchange. The shares of stock exchanges will be traded on stock exchanges, like for any large firm. This paper sketches the dynamic environment of organized trading, identifies the reasons for the transformation of stock exchanges into publicly traded companies, and addresses the regulatory concerns raised by this development.

Keywords: stock exchange, securities trading, self-regulation, SRO, demutualization, conflicts of interest, self-listing

JEL Classification: D23, G15, G18, G28, G32, G38, K22, L33