Securities Regulatory Reasons And Structure Analysis

There is little debate in practice about the necessity of the regulation of the securities market. However, the theoretical research is much insufficient on the problems as why the securities market needs be regulated and how to reach an optimal regulation institution of the securities market. The general economics of regulation mainly researches the regulation of externality, monopoly and public goods, but it lacks the research on the regulation of the securities market, and fails to give a systematical regulation theory of the securities market. In a certain extent, the insufficiency of research on the regulation theory of securities market causes the blindness of the practice of the securities market regulation, and restricts the improvement of the regulation efficiency. To construct a systematical regulation theory of the securities market, it is necessary to thoroughly analyze the causes and the structure of the securities market supervision. Generally, the causes and the structure of regulation involve our comprehension of the regulation and constructing a reasonable regulation system of securities market. In addition, there is endogenous relationship between the causes and the structure. So that this paper selects the causes and structure of the securities market regulation as researching object to aim at revealing some reasons and effective regulation methods of securities market.As to the causes of regulation of the securities market, the mainstream view of economists believes the highly asymmetric information caused the failure of the market mechanism, and the market failure is the cause of securities regulation. In this view, regulation includes the regulation enforced by the law and regulation by the administration. Recently, the theory of incompleteness of law has been developed to modify the market failure opinion about regulation. It recognizes the difference between law regulation and the administration regulation strictly, and points out that the law regulation is the traditional way of deterring market failure and market harmful behaviors. In this theory, regulation, especially the administrative regulation is established mainly because of the incompleteness of laws of the market. And it needs reach two additional enforcement criterions: First, the market harmful behaviors cause grievous damages which make the reactive ex post enforcement of law and the under-efficiency of reactive lawmaking become more and more intolerable for society. Second, the regulator must be qualified the capacity to identify the kinds of market harmful behaviors and draw up the ex ant rules to deter the market harmful behaviors. In the framework of incompleteness theory of law, the causes to establish administrative regulation are explained as the highly incompleteness of securities laws and the serious securities harmful behaviors. The establishment of regulation aims at mitigating incompleteness of securities laws and the enforcement drawbacks of reactive ex post courts. Furthermore, it could help to optimize the allocation of law making rights and law enforcement rights.Differing above, this paper brings forward that the incompleteness of the securities laws is closely related to the securities market failure, so it is necessary to carefully analyze the cause of the securities market failure. The asymmetric information is of course an important reason, but it is widespread in all kinds of markets, and it cannot specifically explain the special reason of the securities market failure. This paper deducesthe following fresh conclusion: the special reason of the securities market failure is the subjectivity in securities pricing, especially in stocks pricing. This subjectivity results in the various harmful behaviors spreading widely and the endogenous incompleteness of law of securities market. It is to say that the incompleteness of securities laws is caused not only by the rapid changes of the equity institutions and techniques, but also by the subjectivity in stocks pricing. Synthetically speaking, the...