This course concerns the law, economics, and institutions of financial trading markets, such as markets for stocks and bonds, which provide "capital" or financing for businesses in the economy. These markets serve vital social functions, including facilitating trade and incorporating information into prices, which serve as guides for the real economy. The course will begin with the major institutions of financial trading markets. It will then address the economic theory that explains their dynamics. These segments lay the groundwork for a more informed discussion of the substantive law that governs capital markets. In particular, we will consider (1) the regulation of market structure; (2) contemporary controversies regarding the modern stock market, such as high-frequency trading and dark pools; and (3) the regulation of misconduct by traders, including manipulation and insider trading.
By the end of the course, students should be equipped to analyze with sophistication important law and public policy issues, such as high frequency trading, dark pools, and market structure. The class is a blend of statutory and case law, economics, and public policy. It should be of value to any student interested in a career involving the capital markets, securities, or with an interest in the functioning and social value of markets.
This course focuses on trading markets, in contrast to Securities Regulation, which focuses on the regulation of the issuers of stocks and bonds, and their agents, in connection with the offering of securities.