. OUTLOOK: THE FUTURE OF STOCK EXCHANGE LAW Stock exchanges and stock exchange law are in a relationship of mutual impact. In theory, stoc...
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OUTLOOK: THE FUTURE OF STOCK EXCHANGE LAW Stock exchanges and stock exchange law are in a relationship of mutual impact. In theory, stock exchange law has the greater influence because policymakers can employ it to shape the exchanges and their surroundings. History reveals, however, that events in practice have more frequently prompted reactions by policymakers than the other way around. As overzealous legislative activity in other areas shows, this is a sensible approach that should be safeguarded against hasty reactions of the type that could be observed during the recent crisis on the financial markets. Looking ahead, it seems likely that it is not the particulars of stock exchanges and stock exchange law that will dominate the debate among policymakers, regulators, and scholars, but instead the question of whether stock exchanges and stock exchange law have any future at all. The dramatic loss of market share and the ever-increasing role of competing trading facilities show that many of the exchanges’
functions may now be carried out by other marketplaces. While, accordingly, the regulation of those new venues gains more and more importance, the traditional canon of stock exchange law has lost much of its former relevance in practice. For many observers, stock exchange law has passed its zenith as a regulatory concept and is today understood merely as a part of capital markets or securities law. This shift is visible in many European jurisdictions: In France and in the United Kingdom, the operation of exchanges is regulated as one financial service among many.220 Germany still has an Exchange Act, but it has become a “limbless torso,” which, since its first enactment (1896), has lost many of its limbs to the Secu- 220 Loi 2000-1223 du 14 décembre 2000 de code monétaire et financier, at art. L 421-26; Financial Services and Markets Act, 2000 at §§ 285-313. 7:513
(2013) Stock Exchange Law 559 rities Trading Act and other laws. 221 Five years ago, we were skeptical that stock exchange law had a future at all.222 In the meantime, though, both the practice of trading as well as the regulatory environment have changed. The fragmentation of markets has considerably increased, and stock exchanges are no longer the place where traders conduct most of their transactions. On many markets, algorithms are now the driving force, with orders placed and canceled in fractions of a second. Both developments—fragmentation and automation—challenge the traditional regulatory regime because they threaten one of the exchanges’ core functions: to concentrate and to standardize trading so that supply and demand will be matched at “fair” prices. If policymakers feel the need to intervene, the result may be provisions that are genuinely ‘stock exchange law.’ Even if those rules will be part of a more general approach in the area of capital markets or securities law, it is not beyond imagination that they will be dubbed ‘stock exchange law’ in the traditional meaning, and in any event, they will be ‘stock exchange law’ in a functional sense. In light of these recent developments, it does not seem too far-fetched to assume that the long history of stock exchange law is about to enter into a new era
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