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This chapter examines the regulation of stock and derivatives exchanges in the European Union. Based on a theoretical analysis of exchanges as transaction platforms, it identifies three major economic functions: listing, trading, and data vending. The chapter explores each of these functions separately. As for listing, it highlights the distinction between admission to listing and admission to trading in the European Union, as well as the role of regulated markets’ potential conflicts of interest on that function. As for trading, the chapter explores some key provisions that contribute to creating liquidity, including those concerning market makers, tick sizes, trading obligations, and best execution. It also addresses the regulatory framework on algorithmic and high-frequency trading. As for data vending, the chapter discusses the pre- and post-trade transparency requirements, and the price regulation of market data. Finally, the chapter analyses the determinants of stock and derivatives exchange governance. |
