Document Type

Article

Publication Date

Summer 1997

Keywords

Secondary securities market, Corporate equities, Speculative trading, Liquidity trading, Portfolio balancing, Disagreement-based trading, Information arbitrage, Transactions costs, Speculation

Disciplines

Securities Law

Abstract

Computer network technology promises to revolutionize the secondary securities market and particularly to reduce dramatically the marginal costs associated with trading corporate equities. Lowering transactions costs usually is presumed to increase trader welfare. Certain unique characteristics of the secondary securities market suggest, however, that reducing the marginal costs associated with trading stocks may have the perverse and counterintuitive effect of decreasing investor welfare. Policymakers should consider this possibility as they respond to the market's rapid evolution.

Comments

This article was written prior to the author's affiliation with Cornell Law School.

Publication Citation

Published in: Washington University Law Quarterly, vol. 75, no. 2 (Summer 1977).

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