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.

RELATED TERMS
  1. Regulation F

    A regulation set forth by the Federal Reserve. Regulation F specifies ...
  2. Regulation E

    Regulation E is a Federal Reserve regulation that outlines rules ...
  3. Regulation AA

    Regulation AA is a regulation designed to address practices by ...
  4. Labor Market Flexibility

    Labor market flexibility is a firms' ability under a jurisdiction's ...
  5. Regulation 9

    Regulation 9 lets national banks open and operate trust departments ...
  6. Regulation P

    Regulation P is one of the regulations which addresses standards ...
Related Articles
  1. Trading

    Get To Know These Crucial US Options Market Regulations

    How are options regulated in the U.S and which organizations are involved in options market regulations?
  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. Insights

    Government Regulations: Do They Help Businesses?

    These rules are in place to protect consumers and help businesses thrive at the same time.
  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. Investing

    Former FB Exec: Regulation Would Favor Tech Giants

    A tech executive sees new regulation as most likely to entrench Facebook, Amazon and Alphabet.
  8. 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.
  9. Trading

    For Individual Investors, These May Be The Best Of Times

    The raging debate on high frequency trading may lead the average retail investor to think that he/she continues to get a raw deal in the stock market. The reality is that these are probably the ...
RELATED FAQS
  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. 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 >>
  3. How are investment banks regulated in the United States?

    Read about the extensive regulations placed on investment banks in the United States, beginning with the Glass-Steagall Act ... Read Answer >>
  4. What are some of the major regulatory agencies responsible for overseeing financial ...

    Discover the specific responsibilities of some of the major regulatory agencies that oversee financial institutions in the ... Read Answer >>
Hot Definitions
  1. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  2. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  3. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  4. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  5. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
  6. Dividend

    A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
Trading Center