Hans Van Houtte

Arbitration Involving Securities Transactions

EACH MONTH, millions of securities transactions are concluded all over the world. Nearly all of them proceed smoothly. Very exceptionally, however, a transaction may give rise to a dispute. Arbitration then seems the proper way to settle such a dispute. Indeed, arbitration is efficient as well as discreet. Moreover, in arbitration settlement may be entrusted to experts who are fully familiar with the intricacies of the securities market. Arbitration relating to securities deals with different types of disputes. Because of the limited scope of this article, many types of disputes cannot be discussed. This article will, for instance, not discuss arbitration of disputes between members of a stock exchange concerning a purchase of securities on that exchange, for instance, whether securities were indeed offered for sale and at what rate, concerning delivery of securities and concerning their payment. It is a fact that the rules of stock exchanges very often provide that such disputes have to be settled through arbitration, organized within the stock exchange. When brokers become members of an exchange, they have to subscribe to the rules of the stock exchange and the arbitration clause often contained therein. Moreover, the transaction forms sometimes expressly refer to the rules, so that by accepting the form, the rules and its arbitration clause are accepted. Even if they did not subscribe to a written arbitration clause, members of a stock exchange may sometimes be considered to be bound by trade usage to submit all disputes to the arbitration, organized within the exchange.1 However, not many arbitrations between members of a stock exchange occur. Stock exchanges constitute closed societies whose members are very interdependent. Even if a dispute over a transaction arises between members, it is generally settled in a friendly way, possibly even under pressure from the exchange authorities. If …