Dark pool is growing, self-supervision is failing- Reflection on the decentralization of the securities market -Part 5

Si Gyeongmin

Sep 28, 2021

2. Rules of conduct for traders

In addition to studying the behavior of listed companies, the exchange also stipulates operating rules for traders. The exchange does not allow any interested persons to enter the market, but instead restricts those who meet certain qualifications from entering the market. In addition, traders must abide by the rules of conduct on the trading floor. The rules of conduct are designed to protect the market from the risk of traders' abuse of fraud, manipulation, or misuse of inside information. According to the Securities Exchange Act, national trading has considerable powers to impose disciplinary sanctions from condemnation to market bans on members who fail to comply with applicable laws and exchange rules.

The exchange has close information and trading ties with traders, and has extensive experience and expertise in understanding trader behavior. In addition, the exchange can be informed of the latest actions on the trading floor as soon as possible. The point is that the penalties imposed by the exchange, including fines, public condemnations, formal warnings, and eventual market bans, will result in reputational impairment and make traders lose the actual economic costs of free trading of securities. In addition, exchange supervision can save investors and taxpayers time, money, and energy, while investors can rely on exchanges for supervision. By monitoring and enforcing securities rules, exchanges can reduce the resource burden on public finances and increase supervision of the market, so that public regulators can also benefit from it.

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