E-Governance in the Financial Capital Markets: The Canadian Capital Market Regulatory Environment

E-Governance in the Financial Capital Markets: The Canadian Capital Market Regulatory Environment

Shantanu Dutta (University of Ontario Institute of Technology, Canada), Ken MacAulay (St. Francis Xavier University, Canada) and Mary M. Oxner (St. Francis Xavier University, Canada)
DOI: 10.4018/978-1-60960-848-4.ch008
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Studies of corporate governance in the capital markets area have focused on the mechanisms and structures of governance and less on the medium through which it is accomplished. This chapter examines the use of information and communications technologies (ICTs) as a medium to enhance governance in the capital markets, focusing in particular on the Canadian capital market. Parallels are drawn between the e-governance issues faced by governments and the capital markets. The chapter concludes with a discussion of future directions for e-governance in the capital markets.
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The Canadian Capital Markets And The Regulatory Environment

Canada is characterized by well-developed capital markets as evidenced by the fact that the market capitalization of exchange-listed issuers is high relative to Canada’s GDP1 (Nicholls, 2006). The capital markets consist of a number of individual markets, the most well known are the markets for equities and fixed-income. In Canada, most equities are traded on organized exchanges (i.e., auction markets), primarily the Toronto Stock Exchange (TSX) and the TSX Venture Exchange2. In contrast, most fixed-income products are traded in dealer or “over-the-counter” (OTC) markets. According to the World Federation of Exchanges, the TMX Group, with a domestic market capitalization of $1.7 trillion in 2009, was the eighth largest stock market in the world.

The regulatory system for the capital markets in Canada is ranked as one of the best in the world. In 2009, the Organization for Economic Co-operation and Development (OECD) ranked Canada fifth in the world in investor protection. In Canada, the capital markets, and the financial industry more generally, are characterized by extensive use of technology, in fact, much of their business is conducted electronically. Further, most of the information required by regulators (to be distributed to the public or provided to the regulators) is disclosed electronically. These factors make Canada a particularly good example to use to examine the use of electronic governance.

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