درباره وجود و ساختار بازار مبادلات ارزی در سراسر جهان

We investigate the cross-section of 256 financial exchanges throughout the world. First, we empirically analyze the country characteristics that are related to having a financial exchange. Second, we investigate the determinants of an exchange's choice of trading mechanism, and third, we examine whether the presence of an exchange in a country impacts the domestic country's economy. We find that the main determinants for an exchange to exist in a country are the size of the economy, trade policy, foreign investment, development of the banking sector and the legal system. Our results show that the choice of trading mechanism depends on the number of assets traded and the legal system. Lastly, we find that the presence of an exchange is associated with a reduction in the growth of the monetary aggregates but is not associated with other measures of domestic growth and productivity.

Understanding the inner workings and overall impact of a financial exchange cannot be underestimated, particularly given the increasing globalization of capital markets. Consistent with its importance, a large literature studies exchange trading and its macroeconomic impact on the economy. Interestingly, this literature focuses almost exclusively on a handful of exchanges in the most developed countries. While crucial to our understanding of exchanges, this literature is incomplete given that at least 60 new equity exchanges have been created globally since 1990, and a significant proportion of global trading is executed on financial exchanges not covered by existing research. For example, equity trading outside the Frankfurt, London, New York, NASDAQ, Paris and Tokyo Stock Exchanges is approximately 27% of global dollar volume and 58% of the global number of transactions.1 We broaden the scope of research on international financial exchanges by analyzing the cross section of 256 financial exchanges within 101 countries out of the total 191 countries around the world. Our analysis has three goals. The first goal is to enhance the understanding of the characteristics of the economic environment that are associated with the presence of a financial exchange in a country. We do this by examining the factors that predict the existence of a financial exchange in a country. In addition, we examine the factors that predict multiple exchanges; this is crucial if competition among exchanges has important economic effects. Our second goal is to analyze factors that determine the choice of trading mechanisms by financial exchanges. This is salient given that the market-microstructure literature has been relatively silent about whether particular trading mechanisms are used within different economic environments and with different types of financial securities. The third goal is to investigate the long-run relation, if any, between the presence of a financial exchange and the domestic economy. Previous research investigating the impact of equity markets on the macro economy has focused on well-developed equity markets in the industrial countries of the world. The contribution of this work is that we investigate the initial exchange formation within a country since 1950 and include countries that do not currently (in 1998) have a financial exchange. Thus, our analysis benefits from knowing the exact formation dates as well as using a more comprehensive sample. From a policy perspective, understanding why some, but not all, countries choose to have one or more exchanges remains a crucial issue. Our findings provide guidance to policy makers trying to determine the viability of an exchange in their country. Moreover, our results help officials of existing exchanges that are facing competitive pressures better evaluate their optimal choice of trading mechanism. Our results show that the presence of at least one financial exchange within a country is associated with larger economies and civil law legal systems. In addition, countries with greater economic freedom are more likely to have an exchange, with trade policy, foreign investment, and banking being the most critical factors. Specifically, countries with open trade policies, that are open to foreign investment, and have developed banking sectors, are more likely to have a financial exchange. When we analyze the existence of one vs. multiple exchanges however, the results show that larger economies with well developed banking sectors and minimal government intervention are associated with a higher probability of multiple exchanges. Our results on the choice of trading mechanism show that exchanges where market participants provide liquidity are more likely to occur within civil law legal systems where many assets are traded on the exchange. Conditioning the analysis on the presence of competing exchanges within a country, the type of government also becomes important as well as the size of the economy. The results are consistent with a hierarchy from systems in which market makers provide liquidity, such as open outcry, to systems where the market participants provide liquidity, such as a limit order book as the economy grows. Lastly, our analysis of the long-run relation between a country's initial exchange formation and its domestic economy reveals that the presence of an exchange is associated with a marked reduction in the growth of the monetary aggregates with little or no impact on other aspects of the macro economy such as domestic credit, productivity and inflation. These results are consistent with the argument made by Allen and Gale (1997) that financial exchanges give market participants the ability to diversify wealth into liquid assets, thereby reducing the need for cash. This paper relates directly to ongoing research that bridges the gap between finance and law and investigates how institutional country characteristics, such as legal system, legal origin and type of government, impact firms’ choice of financing, dividend policy, and corporate ownership structure.2 In a similar vein, we relate institutional country characteristics to the presence or absence of any exchanges within a country and the exchanges’ choice of trading mechanism. In addition, work by Arnold et al. (1999) and Jorion and Goetzmann (1999) on the history and evolution of stock exchanges and stock markets highlights the impact of changes in liquidity provision on the distributed trading volume across markets and the equity premium, respectively. A substantial market microstructure literature addresses how the structure of a financial exchange affects market participants. This literature concentrates on analyzing one, or comparing two, exchanges. Typically this work has focused on the larger United States exchanges: the New York Stock Exchange, NASDAQ and Chicago derivative exchanges (Chicago Board of Trade, Chicago Mercantile Exchange, and Chicago Board of Options Exchange). Subsequent studies focus attention on dominant equity exchanges in developed countries around the world; however, there are exceptions, for example Jain (2003), who compares liquidity measures across 51 exchanges around the world.3 Collectively, these studies cover only a small fraction of the 256 exchanges that are operating in the world today. Like the market microstructure literature, we analyze the trading mechanism chosen by an exchange; however, we investigate the choice using a large cross-section of exchanges. Lastly, a burgeoning literature presents a broad spectrum of arguments concerning the impact of financial market development on the macro economy. Levine (1991), Atje and Jovanovic (1993), Levine and Zervos, 1996 and Levine and Zervos, 1998 and Rajan and Zingales (1998), among others, argue that the development of a capital market within a country serves to make capital more readily available, thereby lowering firms’ cost of capital. In contrast, Allen and Gale (1997) model the benefits of a developed capital market as the ability of market participants to diversify risks. However, it is unclear whether the existence of an exchange provides the catalyst for the economy to grow at a faster rate. Lucas (1988) suggests that the benefit of financial market development on economic growth is at best badly overstated. Still others, such as Devereux and Smith (1994) and Morck et al., 1990a and Morck et al., 1990b, argue that financial market development can actually impede economic growth. More recently, Bekaert and Harvey (2000), Bekaert et al., 2002a and Bekaert et al., 2002b and Bekaert et al., 2001 and Bekaert et al., 2005 analyze the impact of the integration of emerging equity markets into the world economy. Their work is similar to ours in that they date market liberalizations and measure the impact on the domestic economy. Collectively, their results suggest that liberalization increases economic growth and expands the size and liquidity within the domestic stock market by reducing the cost of capital by as much as 0.75% and increasing equity inflows by an average of 1.4%. The remainder of this paper is organized as follows. Section 1 provides the theoretical background for the study. Section 2 describes our data and presents some summary statistics. Section 3 relates country characteristics to the existence of a financial exchange within a country using a probit model. Section 4 provides a probit model of a financial exchange's choice of trading mechanism. Section 5 analyzes the relation between the existence of a financial exchange and the macro economy and Section 6 concludes.

Unlike previous work focusing on a small subset of financial exchanges, we analyze a cross-section of 256 exchanges residing in 101 countries out of the total 191 countries in the world. Initially, we document that about half of the countries have at least one financial exchange. Our analysis reveals that countries with exchanges tend to have larger economies, with developed banking sectors, and civil law legal systems and are more open to foreign trade and investment. In addition, multiple exchanges tend to be in countries with larger economies and well developed banking sectors but also in countries with little, if any, governmental intervention. Our investigation relates an exchange's choice of trading mechanism to the country's legal system and the number of assets traded. Mechanisms relying on market participant liquidity provision are used more often in civil law countries and larger economies. Our results suggest a hierarchy in the set of trading mechanisms, with mechanisms driven by market maker liquidity provision being easier to implement and sustain in smaller, potentially less-developed financial economies. Mechanisms that rely on market participants to supply liquidity require more from market participants to function efficiently. While we have identified factors related to the existence of financial exchanges and their resulting trading mechanisms, the discernible impact of these exchanges on the macro economy seems to be limited to a reduction in the growth rates of the monetary aggregates. This result is consistent with the argument that financial exchanges serve as a vehicle for market participants to diversify their wealth into liquid assets. The creation and availability of liquid financial assets made possible by a financial exchange serves to make cash less of a necessity for market participants. In contrast, we find no significant effect on the economy-wide productivity measures. In conclusion, this paper serves to broaden the scope of research on liquidity provision by taking a macro perspective on the characteristics of financial exchanges around the world. As the global economy expands, it is paramount that we understand why financial exchanges exist, which trading mechanisms are likely to survive within particular economic environments, and what impact financial exchanges have on the domestic economy.