Public Regulation of National Securities Exchanges
A Test of the Capture Hypothesis
University of Rochester, Rochester, NY 14627
and National Bureau of Economic Research
The Bell Journal of Economics, 8 (Spring 1977) 128-150
This paper tests the hypothesis that members of national securities exchanges
have received net benefits from the regulatory activities of the Securities
and Exchange Commission. The prices of stock exchange seats are analyzed in
periods of major changes in the regulation of the securities industry
from 1926-72. Time series regression models are used to identify
changes in seat prices that are unrelated to changes in stock prices or share
trading volume. Empirical analysis of the unexpected changes in seat prices
shows that the most important regulatory change occurred in March 1934,
when the Securities and Exchange Act was first considered by Congress; both
New York and American Stock Exchange seat prices fell unexpectedly by about 50
percent in one month. There is no evidence that this capital loss was ever
recouped. There is also evidence that contradicts the hypothesis that
securities brokers have benefited by capturing control of the
regulators of the securities industry.
Key words: Regulation, S.E.C., Stock exchange, Stock exchange seats
JEL Classifications: G14, G28
Cited 24 times in the SSCI through April 1996
Return to Publications Page