Course | Columbia Law School

This course focuses on issues raised by such questions as: what is "The Market" and how does it really work? How is the market for securities trading structured in the United States? How did it get to where it is today? What is the effect of "globalization" on our markets and on non-U.S. markets? Where do we go from here in terms of structure and regulatory policy and how should we get there?

As the title indicates, we will examine the development, structure, operation and regulation of the various components of the U.S. capital market and the legal and policy questions raised by the various constituencies participating in the market (e.g., broker-dealers; investment banks; institutional investors, including mutual funds, hedge funds, pension funds, banks, and insurance companies; and private investors and issuers) and the regulatory regimes that have been imposed on them. We shall review the evolution, growth and current structure of the securities markets themselves: the NYSE, NASDAQ, the ECNs, and the options and futures markets. For example, how did we get from the NYSE's "closed club" of privileged members with exclusive access to the trading floor, with fixed commission rates and specialists, floor traders and odd-lot brokers executing buy and sell orders on the exchange floor, using an "open outcry" form of trading model, to the freer, electronic, more competitive, and more open markets we see today? We will review the SEC's progress in fashioning intermarket standards through the "NMS" and other rule-making efforts on "soft dollars" directed brokerage and other market practices. What are the appropriate goals and policies for the future given the national and regional differences over appropriate regulatory standards?

The recent "merger" of the NYSE with the EU-based Euronext (joining the Amsterdam, Paris, Brussels, and Lisbon exchanges) and the, thus far, failed effort of NASDAQ to join with the London Stock Exchange, or the possible emergence of another EU consortium of exchanges led by Frankfurt, exemplify the velocity of change in the markets, as well as the benefits and possible consequences of "globalization" of securities markets and financial service entities, that is currently taking place. The consolidation of financial services firms, both in the U.S. (e.g., BlackRock-Merrill Lynch, J.P. Morgan-Chase) and in foreign markets (e.g., Deutsche Bank and its U.S. affiliates), as well as the acquisition (and now sale) of U.S. public companies by non-U.S. companies (e.g., Daimler-Chrysler) all raise regulatory, operational and economic issues worthy of consideration. Further, such matters as the effects of Sarbanes-Oxley and recent securities regulatory reporting, disclosure and offering reforms, the limits of "stabilization" and the role of the antitrust laws in the context of relevant securities regulations, as well as the due diligence duties of underwriters, affect the markets in the U.S. and abroad. All of these matters deserve examination, and an understanding of these issues in the context of a global market is important to persons interested in the functioning of capital markets; coordination of securities regulatory standards, including disclosure, accounting and enforcement issues; and efforts to resolve existing differences in process and substantive issues.

Selected financial service executives and government officials will discuss the role, operation and regulatory policies that affect their organizations and their view of the future for the financial services industry.