Our regulation of the stock market is based on an antiquated statute that does not fit well with the realities of modern securities practice. Corporations hoping to access public markets are required to disclose market-moving information without charge and to all investors simultaneously. This system of mandatory and simultaneous disclosure is designed to protect average, long-term investors, while ensuring that stock prices are accurate reflections of the value of the firms issuing them. But the regulations are premised on faulty assumptions about who is trading in today’s sophisticated, high-speed markets, and why they are trading. The regulation also encourages behavior that we know is socially suboptimal. The end result is regulation that purports to be about fairness for investors, but ends up harming the most vulnerable investors. In this talk, Professor Henderson will propose an alternative regulatory scheme—a market for corporate information—that will achieve fairer outcomes for investors at lower cost.
M. Todd Henderson is the Michael J. Marks Professor of Law and Mark Claster Mamolen Research Scholar.
This Chicago’s Best Ideas talk was recorded on November 17, 2015.