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On the Formation and Structure of International Exchanges

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  • Matthew J. Clayton
  • Bjorn N. Jorgensen
  • Kenneth A. Kavajecz

Abstract

We investigate the formation and structure of 248 financial exchanges throughout the world. First, we empirically analyze the determinants of exchange formation as well as the impact of exchange formation on the domestic country's economy. Second, conditional on formation, we use a probit model to relate the choice of trading mechanism to the characteristics of the economic environment in which the exchange exists. We find that the main determinants of exchange formation in a country are the degree of economic freedom, the growth of the economy, the availability of technology, and the legal system. In addition, we find that the impact of exchange formation on the macro economy is limited to a reduction in the growth of the monetary aggregates with no significant impact on productivity. Lastly, our results show that the choice of trading mechanism depends on the country's economic development, the degree of competition, and the extent of economic freedom.
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  • Matthew J. Clayton & Bjorn N. Jorgensen & Kenneth A. Kavajecz, "undated". "On the Formation and Structure of International Exchanges," Rodney L. White Center for Financial Research Working Papers 22-99, Wharton School Rodney L. White Center for Financial Research.
    • Handle: RePEc:fth:pennfi:22-99
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    Cited by:

    1. Claessens, Stijn & Schmukler, Sergio & Klingebiel, Daniela, 2002. "Explaining the Migration of Stocks from Exchanges in Emerging Economies to International Centres," CEPR Discussion Papers 3301, C.E.P.R. Discussion Papers.
    2. Bekaert, Geert & Harvey, Campbell R. & Lundblad, Christian, 2005. "Does financial liberalization spur growth?," Journal of Financial Economics, Elsevier, vol. 77(1), pages 3-55, July.
    3. Miriello, Caterina & Polo, Michele, 2015. "The development of gas hubs in Europe," Energy Policy, Elsevier, vol. 84(C), pages 177-190.
    4. Baier, Scott L. & Dwyer, Gerald Jr. & Tamura, Robert, 2004. "Does opening a stock exchange increase economic growth?," Journal of International Money and Finance, Elsevier, vol. 23(3), pages 311-331, April.
    5. Hasan, Iftekhar & Malkamaki, Markku, 2001. "Are expansions cost effective for stock exchanges? A global perspective," Journal of Banking & Finance, Elsevier, vol. 25(12), pages 2339-2366, December.
    6. Hasan, Iftekhar & Malkamaki, Markku & Schmiedel, Heiko, 2003. "Technology, automation, and productivity of stock exchanges: International evidence," Journal of Banking & Finance, Elsevier, vol. 27(9), pages 1743-1773, September.
    7. Ben Slimane, FATEN, 2007. "L'Evolution des Marchés Boursiers Européens: Enjeux et limites [European Stock Market Evolution]," MPRA Paper 2607, University Library of Munich, Germany.
    8. Sofia B. Ramos, 2003. "Competition Between Stock Exchanges: A Survey," FAME Research Paper Series rp77, International Center for Financial Asset Management and Engineering.

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