Behind the Stock Market
- Author(s):
- Paolo Saguato
- Posted:
- 09-2026
- Law & Economics #:
- 26-18
- Availability:
- Full text (most recent) on SSRN
ABSTRACT:
In January 2021, retail broker-dealer Robinhood abruptly restricted trading in GameStop and other “meme” stocks, sparking public outrage and political scrutiny. While conspiracy theories spread quickly, a more mundane structural explanation soon emerged: Robinhood’s restrictions were driven by its contractual obligation to meet collateral requirements imposed by the National Securities Clearing Corporation (NSCC), the principal clearinghouse for broker-to-broker transactions in U.S. equity and certain debt securities.
This Article uses the Robinhood episode to examine three often overlooked dimensions of the obscure yet crucial post-trade infrastructure underpinning modern markets. First, securities transactions do not settle instantly: A period of latency separates trade execution from final settlement, creating time for multilateral netting while prolonging counterparty exposure. Second, drawing on Ronald Coase’s theory of the firm, the analysis explains the economic logic behind the rise and persistence of specialized post-trade intermediaries such as NSCC. Third, it examines how blockchain, tokenization, and related financial technologies challenge—but may also be incorporated into—the existing intermediated architecture for clearing and settlement.
Far from being relics of an obsolete market structure, post-trade infrastructures, clearinghouses in particular, are institutional solutions to the transaction costs of multilateral securities markets. Their persistence reflects economic logic, not institutional atrophy. Technological innovation may nevertheless alter the relative costs of existing institutional arrangements and create new ways to perform post-trade functions. Rather than pursuing wholesale disruption, regulators should therefore adopt an incremental and experimental approach to modernization—one that fosters innovation, promotes efficiency, preserves market stability, and generates the institutional knowledge necessary for the post-trade system’s future evolution.
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