Technology, Automation, and Productivity of Stock Exchanges: International Evidence

Posted: 5 Oct 2003

See all articles by Markku Malkamäki

Markku Malkamäki

Evli Bank Plc

Iftekhar Hasan

Fordham University - Gabelli School of Business; Bank of Finland

Heiko Schmiedel

European Central Bank - Securities Settlement Systems Policy Division

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Abstract

This paper stresses the importance of understanding operational choices, strategies, and performances of stock exchanges as regular operating firms [J. Finance 52 (1999) 655; J. Financial Markets 2 (1999) 329]. Using unbalanced panel data on 49 stock exchanges over the period 1989-1998, the paper traces the productivity of stock exchanges over time and across different types and groups of exchanges. We find significant variability in productivity - revenue and cost effciency - across these exchanges. On average, North American exchanges are found to be most cost and revenue effcient. However, our findings also indicate that European exchanges have improved the most, in respect of cost efficiency, while exchanges in South America and Asia-Pacific are found to be lagging as regards both cost and revenue estimations. Evidence also indicates that investment in technology-related developments effectively influenced cost and revenue effciency. Moreover, organisational structure and market competition are found to be significantly associated with both cost and revenue effciency for the exchanges studied, whereas market size and quality are related only to revenue effciency.

Keywords: Stock exchanges, Technological progress, Technical effciency

JEL Classification: C23, G2, L2, O50

Suggested Citation

Malkamäki, Markku and Hasan, Iftekhar and Schmiedel, Heiko, Technology, Automation, and Productivity of Stock Exchanges: International Evidence. Journal of Banking & Finance, Vol. 27, No. 9, September 2003. Available at SSRN: https://ssrn.com/abstract=432580

Markku Malkamäki

Evli Bank Plc ( email )

Aleksanterinkatu 19 A
FIN-00100 Helsinki
Finland

Iftekhar Hasan (Contact Author)

Fordham University - Gabelli School of Business ( email )

Rose Hill Campus Bronx
New York, NY 10458
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

Heiko Schmiedel

European Central Bank - Securities Settlement Systems Policy Division ( email )

Directorate General Payment Systems
Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany
+49-69 13 44 70 59 (Phone)
+49-69 13 44 60 00 (Fax)

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