Technology, Property Rights in Information, and Securities Regulation
This paper argues that the implications of information technology for the regulation of securities are more limited than has often been claimed. It examines two areas (mandatory disclosure and market structure) in which commentators have contended that regulatory change is needed to accommodate technological change. The cost of transmitting, storing and manipulating data, however, is a relatively minor component of the costs associated with corporate disclosure and as a result the optimal level of disclosure is not very sensitive to changes in technology. Similarly, decisions about market structure are attempts to economize on a large set of transaction costs, including credit risks, default risks, and information risks, which are only weakly related to the cost of communicating between buyers and sellers. The paper then observes that a more subtle shift in regulatory philosophy is occurring in response to technology and internationalization. The shift is away from a consumer protection model of securities regulation and toward a model in which the principal task of the regulatory system is to specify and enforce property rights in information.