Effective Securities Irader Supervision: An Equilibrium Model

Rule violations of securities trader has become one of the most serious problems. Its essence is the efficiency problem of securities trader supervision. Through solving a two-stage dynamic game, the paper shows that the government's ex-post securities trader supervision should aim to control the violation of securities trader rule to an appropriate level rather than completely eliminating it. The ordinary ex-post supervision system fails for those violators with low discount rate. The only effective method to this kind violation is to shorten the time lag. An effective supervision should consider the difference among executors firstly, then pay attention to their sensitivities to the penalty, and lastly determine the optimal supervision. level.