Latin American Capital Markets

284 ROBERTA S. KARMELing market conditions is unclean The SEC has issued a complex and provocativerelease on some of these fees, and however uncomfortable the SEC may be withestablishing fees for market users, this is an issue that will not disappear 28 Clearly, rigorous,expert, and fair regulation is not possible unless SRO regulation is adequatelyfunded. But after demutualization, subsidizing general broker-dealer enforcement activitiesthrough fees other than regulatory assessments of members may prove difficultThe exchanges could try to make fines and penalties a profit stream, and thiswould raise a variety of new questions and problems. This suggests that the U.S. securitiesindustry is likely to focus on the costs of duplicative self-regulation (SIA 2000).Any Latin American exchange considering demutualization would need to analyzehow it currently pays for regulation of its markets and members and whether thesefunding sources would still be available after demutualization.Demutualization ExperiencesNo two demutualizations have proceeded exactly the same way, due to differencesin legal, political, and corporate finance systems across countries and the range ofstrategies that exchanges have followed. Review of the various exchange demutualizationscan provide valuable lessons and models for Latin American countries.The demutualization of the Stockholm Stock Exchange, the first to take place,accomplished many of the goals the Swedish authorities envisioned, but had some unexpecteddevelopments.The demutualization in Australia involved a common-law federalsystem, in which the stock exchange had considerable self-regulatory powers.Thisdemutualization also was successful, but the Australian competition authority thwartedsome of the objectives of the demutualized exchange. The demutualization in Amsterdamcoincided with a rearrangement of government and self-regulatory responsibilitiesand was followed by a merger of the Paris, Amsterdam, and Brussels exchanges.SwedenIn 1989, the Swedish government formed a committee to study the stock market; in1992, it passed a new stock exchange law based on the committee's recommendations.With these political and legal changes, there was a pioneering transformation of28 Regulation of Market Fees and Revenues, Exchange Act Release No. 42208, 64 Fed. Reg. 70613 (December 9,Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub1999).