Market structure and disempowering regulatory intermediaries: Insights from U.S. trade surveillance

Abstract

AbstractPublic agencies outsource a wide variety of tasks to nonstate actors, or what can be referred to as regulatory intermediaries. In certain circumstances, these agencies may seek to disempower those regulatory intermediaries by reclaiming, duplicating, or transferring the outsourced task. When will these disempowerment attempts be successful? This article presents the Market Structure Hypothesis, which contends that the level of competition between regulatory intermediaries will, all things equal, determine whether disempowerment attempts succeed. To test this hypothesis, this article examines the U.S. Securities and Exchange Commission's attempts to acquire the independent capacity to conduct nationwide trade surveillance in the 1980s (Market Oversight Surveillance System) and 2010s (Consolidated Audit Trail). Evidence derives from archival materials, a Freedom of Information Act Request, and 60 interviews in Oxford, London, Toronto, New York City, and Washington, DC. The empirical results corroborate the hypothesis' expectations, contributing to our understanding of public‐private partnerships and shedding new empirical light on an understudied topic of securities regulation.