Finding Similarities Between Securities and Life

By | June 17, 2018

What you Should Know About Financial Markets Regulation

Regulation can lead to mixed results in the financial markets. There are various reasons why players in the financial sector love regulation. For example, regulation protects them from losing their money when engaging in the financial markets. In some cases, regulation may be applied and executed by one firm to a particular area of the financial market. Some countries also allow multiple bodies to regulate various sectors of the financial market. Regardless of the bodies in charge, regulation has its benefits and downsides.

Rules Are Different Across the Globe
In every country around the world, there are regulatory bodies that are in charge of coming up and implementing policies related to the securities market. The main difference among the bodies is the extent to which they are involved in the financial industry.

In some countries, all matters related to the financial sector have been assigned to a single regulatory firm. In these countries, players in the financial sector have to engage with the regulator in one way or another. Examples of the areas that a regulators body may be in charge of include insurance, banking and trading securities. All the rules related to the financial sector of the country may be made by the regulatory body.

There are various advantages of having a single regulatory body. For example, players in the financial industry as well as investors will operate easily when they only have to comply with the regulations of a single body. Getting guidance on different issues becomes easier for both players and investors. Finally, investors can have all their concerns addressed in one go when they contact the regulator.

Countries that have a single regulator find it easy to enforce financial rules. The regulator can also easily address all the concerns that player in the securities or other financial markets may have.

Working with Different Regulators
In some countries, the financial industry is divided into subsectors which are then regulated by different bodies. For example, all matters related to insurance may be regulated at the state level. However, the central government may take on the task of regulating the banking sector. Other sectors of the financial markets, such as securities and futures trading, may be regulated by other bodies.

There are also advantages and disadvantages of having multiple regulators in an industry. One of the benefits of having multiple regulators is that participants in the financial markets can get specialized help. This help would not be easily provided if there was only one regulator in the county. Moreover, since none of the agencies have unlimited powers, they are bound to cooperate with each other.

The above is an overview of the pros and cons of single and multiple regulators.

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