Policy Alternatives

Create a regulatory committee

• They should enforce a rule that limits the number of accounts based on perhaps twice the maximum amount of people that can be on their site.
• They could enforce limit buying or selling to keep customers from making big mistakes.
• The should police the brokerage firms to make sure they are following ethical business practices.
• The advantage is that it will solve the problems.
• The disadvantages are that it could be hard to enforce these rules, and it will cost a lot.

Enact trading halts for unstable stocks

• This was proposed by the National Association of Securities Dealers.
• It has worked in the New York Stock exchange in the past.
• When a stock starts bouncing around a lot, a halt will go into effect to allow the market time to cool down.
• The advantages are that it will help solve the problem of slowdowns and it will cost very little.
• The disadvantage is that it doesn't solve the problem of misleading advertisement.

Extend the time that market makers have to post prices before an initial public offering can begin

• This was proposed by a committee of Nasdaq market makers, brokerage firms, and industry officials.
• By increasing the time, it gives the market a chance to see the price and adjust accordingly.
• The advantages are that it will help solve the problem of volatility and it will cost very little.
• The disadvantage is that it doesn't solve the problem of misleading advertisement.

Don't do anything at all

• New technologies may help solve these problems in the next few years.
• The competition in the industry will force out any firm that causes too many problems.
• The advantage is obviously that it doesn't cost anything.
• The disadvantage is that it doesn't solve any problems.

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This page was last revised on March 7, 1999 by Ben Cipiti. Please send comments on, or suggestions for, this web page to bc912196@oak.cats.ohiou.edu