Competition and Integration among Stock Exchanges: The Dilemma of Conflicting Regulatory Objectives and Strategies

Abstract

-Different aspects of competition in stock exchanges have been discussed from either a positive or normative perspective, but this article seeks to come up with an approach encompassing both positive and normative dimensions of competition in various aspects of stock exchanges' activities. As far as the positive nature of the securities market and industry is concerned, conflicting trends are emerging. The liberalization of securities markets and the disappearance of technical barriers have dismantled the monopoly of national stock exchanges but led to more consolidation. However, we are also witnessing a destabilizing and fragmenting effect of competition on these markets. Following an analysis of the normative/positive dichotomy in approaching competition in financial services, we discuss the centrality of information disclosure in creating a competitive and stable financial market. Disclosure of information, therefore, reinforces both competitive and prudential objectives alike. In a further attempt, we discuss the tension between the principles of competition and prudence alongside the conflict between competition objectives and economies of scope and scale. While arguments in weighing competition against economies of scope and scale are evenly balanced, the unique characteristics of such markets do not allow the absolute application of competition principles when it comes to prudential