On the Formation and Structure of International Exchanges

33 Pages Posted: 16 Nov 1999

See all articles by Matthew J. Clayton

Matthew J. Clayton

University of Virginia - McIntire School of Commerce

Bjorn Jorgensen

London School of Economics & Political Science (LSE) - Department of Accounting and Finance

Kenneth A. Kavajecz

Phoenix Rising Advisory

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Date Written: April 2000

Abstract

We investigate the formation and structure of 248 financial exchanges throughout the world. First, we empirically analyze the determinants of exchange formation as well as the impact of exchange formation on the domestic country's economy. Second, conditional on formation, we use a probit model to relate the choice of trading mechanism to the characteristics of the economic environment in which the exchange exists. We find that the main determinants of exchange formation in a country are the degree of economic freedom, the size of the economy, the availability of technology, and the legal system. In addition, we find that the impact of exchange formation on the macro economy is limited to a reduction in the growth of the monetary aggregates with no significant impact on productivity. Lastly, our results show that the choice of trading mechanism depends on the country's economic development, the degree of competition, and the extent of economic freedom.

JEL Classification: G12

Suggested Citation

Clayton, Matthew J. and Jorgensen, Bjorn N and Kavajecz, Kenneth A., On the Formation and Structure of International Exchanges (April 2000). Available at SSRN: https://ssrn.com/abstract=184828 or http://dx.doi.org/10.2139/ssrn.184828

Matthew J. Clayton

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States
434-243-4043 (Phone)
434-924-7074 (Fax)

Bjorn N Jorgensen

London School of Economics & Political Science (LSE) - Department of Accounting and Finance ( email )

Department of Accounting Room, OLD 2.17
Houghton Street
London, WC2A 2AE
United Kingdom

HOME PAGE: http://www.lse.ac.uk/accounting/people/bjorn-jorgensen

Kenneth A. Kavajecz (Contact Author)

Phoenix Rising Advisory ( email )

519 NORTH PINCKNEY STREET
MADISON, WI 53703
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6087704677 (Phone)

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