Laws to establish a securities markets and stock exchanges play a key role in facilitating the providing of financing for domestic investment. Misuse of securities markets has resulted in the need for strict rules governing (a) the issue of securities to the public; (b) the registration and trading of securities; (c) the operation of stock exchanges; (d) the regulation of dealers, brokers, and other persons involved in the securities industry; (e) the strict requirements for prospectuses as well as for disclosure; and (f) the operation of publicly listed companies. A key component of the capital market is the creation and trading of asset-backed securities, which play a critical role in effective risk management by financial institutions and in strengthening access to finance by creating liquidity. However, securitization transactions call for a sophisticated system of laws on secured transactions, negotiable instruments, and creditor rights, as well as effective enforcement systems, as outlined in box 9.1. Legal aspects of securities markets regulation, drawing on IOSCO objectives and principles, are discussed in chapter 5.