Research Handbook on Securities Regulation in the United States

Research Handbook on Securities Regulation in the United States

Research Handbooks in Financial Law series

Edited by Jerry Markham and Rigers Gjyshi

This fascinating Handbook provides a clear explanation of the securities market regulation regime in the United States. A diverse set of contributors offer a comprehensive overview of the regulatory process, Dodd-Frank, the principal securities statutes, and the regulators and market participants involved. In addition to a general summary of the topic, this volume provides detailed explanations of the process for registering securities, exemptions from registration, secondary distributions, and the underwriting process. Scholars and students of financial law, banking and regulatory law will find this book a useful resource, as will attorneys, compliance professionals, risk-mitigation professionals and corporate leaders.

Chapter 6: Secondary markets

Roel C. Campos and Marlon Q. Paz

Subjects: economics and finance, financial economics and regulation, law - academic, finance and banking law

Extract

The secondary market for U.S. securities serves as the centerpiece of the U.S. capital markets. The essence of the “secondary market” was aptly captured in 1974 by Philip A. Loomis, Jr., then Commissioner of the Securities and Exchange Commission (“SEC”), who described it as “… a mechanism by which investors everywhere may have their orders executed in a more efficient way, and hopefully at lower cost and with better prices, and where all the resources of the securities community may be brought to bear to provide fair and orderly markets with depth and liquidity, as well as the benefits of competition.” Central to understanding the notion of a secondary market in the United States is that the term defines the process for trading stock after the initial issuance, and does not describe an institution. As former Commissioner Loomis stated, “That, presumably, is why we refer to a central market system, not simply to a central market. It is not to be a building located somewhere, nor will it, at least initially, be an organization springing full-blown from the brow of its creators … .” This chapter focuses on the applicable federal regulation of the secondary market for securities in the United States. The system for trading securities after the initial issuance by a company (the secondary market) has evolved considerably in response to periods of stress on the markets and private sector advances.

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