Regulated Exchanges Dynamic Agents of Economic Growth

Since the inception of the World Federation of Exchanges in the 1960s, the competitive landscape for organized exchanges has radically mutated. Technology and globalization have allowed financial flows to move freely across borders, and burgeoning competition and lower regulatory barriers have spurred far-reaching transformations in the way securities are traded. Still, exchanges epitomize transparency in the price-formation process, informing investors and disseminating vital information for the functioning of financial markets. Further, they represent an important source of capital for nascent and established companies alike. During the recent crisis, exchanges have remained open and liquid in the face of extreme volatility and disruption in interbank and OTC markets. This fact has emphasized the trust investors place in regulated exchanges when confronted with uncertainty. Against this background, the World Federation of Exchanges has partnered with the Centre for European Policy Studies to produce a volume of essays to commemorate the WFE's 50th anniversary. The essays are organized into three parts. The first part of the volume is conceptual in nature, with original essays by academics on the historical contribution of exchanges to world's economic growth, exchanges' economic importance, and the regulatory characteristics of the space in which exchanges operate. The second part of the volume, written by practitioners, refers to some milestones in the history of exchanges, such as the birth of financial derivatives, the launch of electronic trading, the collapse of Communism and the emergence of new markets, and the conception of corporate social responsibility. These chapters show the interaction of the individuals founding the exchanges with their local cultures and their contemporary world financial markets. The third part of the volume is forward-looking. It takes a look at the competitive landscape and future prospects of regulated exchanges. In the aftermath of the global financial crisis of 2007-09, rules and markets are changing rapidly, as both the public and investors demand greater transparency in the financial sector. Regulated Exchanges reflects upon the historical and present importance of exchanges in promoting economic growth and in forming prices for the correct functioning of market economies. It will give readers the opportunity to assess the role of regulated markets in the economy, the functioning of the financial sector, and the shape of regulation.

Larry Harris holds the Fred V. Keenan Chair in Finance at the University of Southern California Marshall School of Business. His introductory text on the economics of trading, Trading and Exchanges: Market Microstructure for Practitioners (Oxford University Press: 2003), is widely regarded as required reading for entrants into the securities industry. In July 2002, Professor Harris was appointed Chief Economist of the U.S. Securities and Exchange Commission, where he served until June 2004.