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On the Formation and Structure of International Exchanges

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  • Matthew J. Clayton

    (New York University)

  • Bjorn N. Jorgensen

    (Harvard University)

  • Kenneth A. Kavajecz

    (University of Pennsylvania)

Abstract

We investigate the formation and structure of 248 financial exchangesthroughout the world. First, we empirically analyze the determinantsof exchange formation as well as the impact of exchange formation onthe domestic country's economy. Second, conditional on formation, weuse a probit model to relate the choice of trading mechanism to thecharacteristics of the economic environment in which the exchangeexists. We find that the main determinants of exchange formation in acountry are the degree of economic freedom, the size of the economy,the availability of technology, and the legal system. In addition, wefind that the impact of exchange formation on the macro economy islimited to a reduction in the growth of the monetary aggregates withno significant impact on productivity. Lastly, our results show thatthe choice if trading mechanism depends on the country's economicdevelopment, the degree of competition, and the extent of economicfreedom.

Suggested Citation

  • Matthew J. Clayton & Bjorn N. Jorgensen & Kenneth A. Kavajecz, 1999. "On the Formation and Structure of International Exchanges," Tinbergen Institute Discussion Papers 99-079/2, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:19990079
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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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