Securities Law Commons^™

Informed Trading And Its Regulation, Merritt B. Fox, Lawrence R. Glosten, Gabriel Rauterberg

Faculty Scholarship

Informed trading – trading on information not yet reflected in a stock’s price – drives the stock market. Such informational advantages can arise from astute analysis of varied pieces of public news, from just released public information, or from confidential information from inside a firm. We argue that these disparate types of trading are all better regulated as part of the broader phenomenon of informed trading. Informed trading makes share prices more accurate, enhancing the allocation of capital, but also makes markets less liquid, which is costly to the efficiency of trade. Informed trading thus poses a fundamental trade-off in …

Measuring Share Price Accuracy, Merritt B. Fox

Faculty Scholarship

This Article concerns how to measure share price accuracy. It is prompted by the fact that many scholars believe that the prices established in the stock market affect the efficiency of the real economy. In their view, more accurate prices increase the amount of value added by capital-utilizing enterprises as these enterprises use society's scarce resources for the production of goods and services. More accurate share prices help improve both the quality of choice among new proposed investment projects in the economy and the operation of existing real assets currently in corporate hands.

The proposition that more accurate share prices …

Law, Share Price Accuracy And Economic Performance: The New Evidence, Merritt B. Fox, Randall Morck, Bernard Yeung, Artyom Durnev

Faculty Scholarship

Mandatory disclosure has been at the core of U.S. securities regulation since its adoption in the early 1930s. For many decades, this fixture of our financial system was accepted with little examination. Over the last twenty years, however, mandatory disclosure has been subject to intensifying intellectual crosscurrents. Some commentators hold out the U.S. system as the standard for the world. They argue that adoption by other countries of a U.S.-styled system, with its greater corporate transparency, would enhance their economic performance. Other commentators, in contrast, insist that the U.S. mandatory disclosure regime represents a mistake, not a model. These crosscurrents …

Insider Trading In A Globalizing Market: Who Should Regulate What?, Merritt B. Fox

Faculty Scholarship

Trading by an insider on the basis of material non-public corporate information violates the securities laws of the United States and of many, but not all, other countries. As the market for securities becomes increasingly global, the question of whose rules should apply to any particular transaction will arise with increasing frequency. This article addresses that question.

Each country's regime concerning insider trading – which transactions, if any, to ban, and how to do so – has largely evolved through consideration of transactions that are entirely domestic in character and impact. In these transactions, the issuer's state of incorporation and …