Capital Markets Regulation   [Archived Catalog]
2016-2017 School of Law Bulletin (Archived Copy)

LAWS 616 - Capital Markets Regulation

Credits: 2

This course concerns the regulation of capital markets: the New York Stock Exchange, NASDAQ, and the wide variety of other institutions devoted to the trading of securities. Capital markets perform important social functions: providing liquidity for investors and incorporating information into prices, which in tum serve as vital guides to real economic activity. The effectiveness with which capital markets perform these functions and their costs of operation are determined in significant part by the rules governing the persons who operate, and trade in, these markets. The course will begin with a consideration of major domestic and transnational capital market institutions. It will then address the economic theory that explains how capital markets operate (market-microstructure economics) and the incentives that motivate their various players. These beginning segments lay the groundwork for a more informed discussion of the substantive law that governs capital markets. Specific regulatory areas to be considered include the rules relating to (1) transparency: who knows (and when) the prices at which securities are being offered and sold (the "ask quotes") and the prices at which actual trades occurred, (2) a broker's execution of a customer's orders, (3) dealers transacting directly with retail customers, (4) market making more generally, (5) trading system alternatives to the NYSE and NASDAQ, (6) trader behavior including manipulation, short selling and insider trading. The course, with its focus on persons who operate or trade in capital markets, should be distinguished from Securities Regulation, which is devoted primarily to the regulation of the behavior of the firms that issuer securities and their agents in connection with the primary offering and secondary trading of their securities.

Prerequisites: Business Associations, Business Corporations, Corporations or Securities Regulation  

Basis of Grade: Exam performance, with slight adjustments based on in-class participation and performance. Class may involve both a midterm and a final exam.

Form of Grade: Letter