Law's signal: A cueing theory of law in market transition

Securities markets are commonly assumed to spring forth at the intersection of an adequate supply of, and a healthy demand for, investment capital. In recent years, however, seemingly failed market transitions-the failure of new markets to emerge and of existing markets to evolve-have called this assumption into question. From the developed economies of Germany and Japan to the developing countries of central and eastern Europe, securities markets have exhibited some inability to take root. The failure of U.S. securities markets, and particularly the New York Stock Exchange, to make greater use of computerized trading, communications, and processing technologies, meanwhile, seems to suggest some market resistance to technological modernization. In light of this pattern, one must wonder: How are strong markets created and maintained, and what might be law's role in this process?.