A New Risk-Adjusted Performance Approach for Measuring the Value of Securities Exchanges

Valuing securities exchanges is far from constituting a well established stream of research. The traditional fields of investigation deal with governance issues, network effects (owing to the relevance of alliances among exchanges) and efficiency measures (focusing, in particular, on the implications of conglomerate exchanges with highly diversified business models). The body of literature dealing with network economics builds on the works of Economides (1993) and Economides and Flyer (1997). Another work modeling alliances between exchanges is that of Di Noia (1999). The application of network economics to stock exchanges constitutes the backbone of the research dealing with the economics of exchanges. In particular, alliances between stock exchanges permit the exploitation of economies of networking, both direct and indirect. This is a problem of both competition and coordination. Competition should be promoted, since customers should have the right to access all the services related to exchange trading, choosing for each of them the provider offering better conditions. Coordination is assured as long as exchanges adhere to common standards (compatibility) granting equal access to users (Economides and Flyer, 1997); it is, therefore, a precondition for proper competition in the market.