Stock and Derivatives Exchanges in the European Union

This chapter examines the regulation of stock and derivatives exchanges in the European Union. Based on a theoretical analysis of exchanges as transaction platforms, it identifies three primary economic functions: listing, trading, and data vending. The chapter explores each of these functions separately. As for listing, it highlights the distinction between admission to listing and admission to trading in the European Union and the role of regulated markets’ potential conflicts of interest in that function. As for trading, the chapter explores key provisions that contribute to creating liquidity, including market makers, tick sizes, trading obligations, and best execution. It also addresses the regulatory framework for algorithmic and high-frequency trading. As for data vending, the chapter discusses the pre- and post-trade transparency requirements, and the price regulation of market data. Finally, the chapter analyses the determinants of stock and derivatives exchange governance