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Are fairer markets more efficient? Research from the CMCRC suggests a correlation

New research released by the Capital Markets Cooperative Research Centre (CMCRC) examines the relationship between violations of integrity standards set by exchange- operators or regulators and the consequences for security market efficiency. The research covering over 30 markets shows that while improving market fairness helps reduce transaction costs, not all market design changes simultaneously enhance both fairness and efficiency.

“The mandate of securities market regulators around the world is very consistent, namely, to ensure that securities markets (and changes thereto) are fair and efficient, said CMCRC CEO Professor Michael Aitken. “Notwithstanding the consistency of this mandate, it is somewhat surprising that less than a handful of regulators have actually formally defined fairness and efficiency. Our research addresses this task and defines the terms such that one can build measurement proxies for each.”