Public Regulation of National Securities Exchanges
A Test of the Capture Hypothesis
G. William Schwert
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 44 times in the SSCI and SCOPUS through 2017
© Copyright 1977, AT&T
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