What is a 'Regulated Market'

A regulated market is a market over which government bodies or, less commonly, industry or labor groups, exert a level of oversight and control. 

BREAKING DOWN 'Regulated Market'

Regulation curtails the freedom of market participants or grants them special privileges. Regulations include rules regarding how goods and services can be marketed; what rights consumers have to demand refunds or replacements; safety standards for products, workplaces, food and drugs; mitigation of environmental and social impacts; and the level of control a given participant is allowed to assume over a market.

Ancient civilizations imposed rudimentary regulations on markets by standardizing weights and measures and providing punishments for theft and fraud. Since that time, regulations have mostly been imposed by governments, with exceptions: medieval guilds were trade bodies that strictly controlled access to given professions and defined the requirements and standards for practicing those professions. Beginning in the 20th century, labor groups have often played a more or less official role in regulating certain markets.

Examples of regulatory bodies in the U.S. include the Food and Drug Administration, the Securities and Exchange Commission and the Environmental Protection Agency. These agencies derive their authority and their basic frameworks for regulation from legislation passed by Congress, but they are parts of the executive branch and their leaders are appointed by the White House. They are often charged with creating the rules and regulations they enforce, based on the idea that Congress lacks the time, resources or expertise to write regulation for every agency.

Arguments for and Against Regulated Markets

Supporters of a given regulation – or regulatory regimes in general – tend to cite benefits to the wider society. Examples include limiting mining companies' ability to pollute waterways, banning landlords from discriminating based on race or religion, and granting credit card users the right to dispute charges.

Regulations are not always purely beneficial, however, nor are their rationales always purely altruistic. Labor unions have at times successfully lobbied for regulations granting their members exclusive access to certain jobs, for example. Even well-intentioned regulations can carry unintended consequences. Local-content requirements are often imposed in order to benefit domestic industry. A government might require that cars or electronics sold in the country contain a certain proportion of locally manufactured components, for example. These rules do not necessarily succeed in nurturing local manufacturing, but often lead to letter-of-the-law workarounds (components made in fully staffed factories elsewhere and assembled by a handful of employees in-country) or black markets.

Some advocates of free markets argue that anything in excess of the most basic regulations is inefficient, costly, and perhaps unfair. Some argue that even modest minimum wages raise unemployment by creating a barrier to entry for low-skilled and young workers, for examples. Advocates of the minimum wage cite historical examples in which highly profitable companies paid wages that did not provide employees with even a basic standard of living, arguing that regulating wages reduces exploitation of vulnerable workers.

  1. Regulation F

    Regulation F is a regulation that sets limits on the amount of ...
  2. Regulation X

    Regulation X is a rule that limits the amount of credit foreign ...
  3. Financial Services Authority - ...

    The Financial Services Authority was the financial services regulatory ...
  4. Regulation C

    Regulation C is a regulation that orders depository institutions ...
  5. Regulation O

    Regulation O is a Federal Reserve regulation that places limits ...
  6. Regulation CC

    Regulation CC is a federal policy that sets certain standards ...
Related Articles
  1. Insights

    Financial Regulators: Who They Are and What They Do

    Find out how these financial regulators govern the financial markets.
  2. Insights

    Understanding a Free Market Economy

    Why would we want a free market economy?
  3. Insights

    Fintech in the Trump Era: Regulatory Changes to Expect

    Will Trump’s administration try to repeal Dodd-Frank, or simply change financial regulations?
  4. Small Business

    Hiring? Regulations Small Businesses Need to Know

    When a small business becomes an employer, it has new responsibilities. Make sure you familiarize yourself with regulatory requirements.
  5. Investing

    The Party for Bank Stocks May Be Over

    While bank stocks surged following the election, these securities declined recently.
  6. Insights

    Financial Regulations: Glass-Steagall to Dodd-Frank

    Here are some of the most important financial regulations that have been established.
  7. Personal Finance

    Minimum Wage: Good Cause Or Economic Pariah?

    Here are some positives and negatives to help you decide where you stand on the minimum wage debate.
  8. Investing

    Former FB Exec: Regulation Would Favor Tech Giants

    A tech executive sees new regulation as most likely to entrench Facebook, Amazon and Alphabet.
  9. Trading

    Navigating U.S. Regulations for Forex Brokers

    Forex is, understandably, tightly regulated. We navigate the forex regulations in the United States and other countries.
  1. How are asset management firms regulated?

    Find out how the asset management industry is regulated and how those regulations fit within the broader scope of financial ... Read Answer >>
  2. What types of regulations are in place regarding fringe benefits?

    Read about the types of regulations that impact employee fringe benefits in the United States, including benefits mandated ... Read Answer >>
  3. Who regulates mortgage lenders?

    The Federal Truth in Lending Act and the Real Estate Settlement Procedures Act (RESPA) dictate most of the regulations mortgage ... Read Answer >>
  4. How does government regulation impact the drugs sector?

    Government regulation lengthens the process for bringing new pharmaceuticals to market and restricts the drugs sector to ... Read Answer >>
Trading Center