Are There Economies of Scale in Stock Exchange Activities?

31 Pages Posted: 17 Oct 2007

Date Written: March 31, 1999


This 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.

Keywords: stock exchanges, alliances, economies of scale, technology

JEL Classification: D4, G20, G28, F33, L22, O33

Suggested Citation

Malkamäki, Markku, Are There Economies of Scale in Stock Exchange Activities? (March 31, 1999). Bank of Finland Research Discussion Paper No. 4/1999. Available at SSRN: or

Markku Malkamäki (Contact Author)

Evli Bank Plc ( email )

Aleksanterinkatu 19 A
FIN-00100 Helsinki

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics