Regulation

Regulation is the oversight and control of operations carried out by market participants according to established rules, performed by organizations authorized to enforce these rules.

Regulation can be external or internal.

Internal regulation refers to adherence to a company’s own internal regulatory documents, such as the Charter, Rules, and other internal policies of the exchange, which are developed to manage its operations, employees, and exchange divisions.

External regulation refers to oversight of the exchange’s operations and compliance with regulatory acts developed by the state, international agreements, and other authorized bodies.

Who Regulates Exchange Activity

The exchange’s activities are overseen by bodies or organizations authorized to perform regulatory functions:

• State regulation, carried out by authorized government bodies.
• Market self-regulation, conducted by professional market participants.

Also, there are two approaches to self-regulation:

• The state can delegate certain regulatory functions to special, authorized organizations or professionals.
• Professional organizations can establish self-regulatory bodies that are granted specific regulatory powers over exchange participants or all exchanges, in accordance with agreed rules.

Goals of Market Regulation

Market regulation pursues several objectives, for example:

• Ensuring fair and orderly conditions for all market participants.
• Guaranteeing free and transparent pricing on the exchange, considering supply and demand factors.
• Creating an efficient market with incentives for entrepreneurs and appropriate risk rewards.
• Developing new exchange markets, maintaining exchange infrastructure, fostering innovation.
• Occasionally influencing the market to achieve socially significant goals, such as stabilizing prices.

What Regulation in Stock Markets Includes

Regulation includes:

• Developing an appropriate regulatory framework for market operations, including laws, regulations, instructions, and other rules to ensure proper market functioning.
• Licensing or selecting professional intermediaries who meet specific requirements for knowledge, experience, and capital, as established by authorized bodies.
• Monitoring market participants’ compliance with the rules and regulations, conducted by designated regulatory authorities.
• Establishing sanctions for deviations from exchange rules, which can include warnings, fines, or exclusion from the exchange.