We construct a model whereby stock exchanges take a new role as an information intermediary, notably absent in their roles. We show that exchanges differentiate themselves at subgame perfect equilibrium and will not race to the top or the bottom.

Empirical evidence on the distributional characteristics of common stock returns indicates: (1) A power-law tail index close to three describes the behavior of the positive tail of the survivor function of returns (pr(r x) ~ x^-\alpha), a reflection of fat tails; (2) general linear and...