Market Microstructure in Emerging and Developed Markets

CHAPTER 6

The Architecture of Securities Market Supervision before and after the Crisis

DONATO MASCIANDARO

Full Professor of Economics, Chair in Economics of Financial Regulation, Department of Economics and Paolo Baffi Centre, Bocconi University and SUERF

MARC QUINTYN

Division Chief, Institute for Capacity Development, International Monetary Fund

INTRODUCTION

What is the current state of the securities market supervision architectures? The financial crisis of 2007–2008 shows the financial services markets are deeply integrated, suggesting a corresponding integrated supervisory approach. Market integration calls for supervisory integration were obvious even before the crisis, particularly in the European Union (EU) setting (Hertig and Lee 2003; Jovanic 2006; Avgouleas 2007).

Securities supervision and regulation has three core goals: (1) protecting investors, (2) ensuring efficiency and transparency in the markets, and (3) reducing systemic risk (IOSCO 1998). The effectiveness in pursuing these three goals relies on the capacity of collecting and producing information. In fact, national securities supervisors have progressively moved away from securities regulation (Carvajal and Elliot 2007). The supervisor's role is to ensure that markets are given full, timely, and accurate information, while the regulation is even more defined in international fora.

During the past three decades, the need for information gathering has taken place against the backdrop of fundamental changes ...