Only a generation ago, UK investment markets were regulated by self-governing exchanges. Though independent exchanges still exist, investment markets have become regulated in ever more detailed ways by statutory bodies such as the Financial Services Authority. These bodies have no clear lines of accountability, nor do they have incentives to develop appropriate systems of regulation.
This monograph shows that the arguments in favour of statutory regulation are unconvincing and have weakened as the potential for international competition between exchanges has developed. The history of sophisticated self-regulating investment markets is an astonishing success story. Experience shows that statutory regulation of investment markets is unnecessary and has the potential to abuse important principles of the 'rule of law'. Given this, statutory financial regulators should be abolished. Some of their functions could be given to other government bodies, but one of their most important functions - that of regulating investment markets - should be handled by private bodies.
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