Are there Economies of Scale in Stock Exchange Activities?
AbstractThis is the first paper that examines economies of scale in stock exchanges. The data employed in the study include cost and output statistics for 37 stock exchanges in four continents around the world for the year 1997. I estimate two traditional cost functions and find that ray (overall) scale economies exist only in the very large stock exchanges but that there are significant scale economies with respect to one of the outputs, ie the processing of trades. On the other hand, there are not equally clear scale advantages related to activities involving company-specific information. There are thus opposing forces, some tending to increase standardization and scale and others favouring the continuization of more localized facilities. The outcome of increasing competition may be not be the amalgamation of exchanges but instead the centralization of certain functions, eg the trading function, and continued realization of others on a decentralized basis. There is nonetheless an obvious incentive for closer and deeper cooperation between European stock exchanges.
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Bibliographic InfoPaper provided by Bank of Finland in its series Research Discussion Papers with number 4/1999.
Length: 31 pages
Date of creation: 31 Mar 1999
Date of revision:
stock exchanges; alliances; economies of scale; technology;
Find related papers by JEL classification:
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- G20 - Financial Economics - - Financial Institutions and Services - - - General
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
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