Stock exchanges of small economies
Encyclopedia
A Stock exchange is a corporation
or mutual organization
which provides trading facilities for stock broker
s and trader
s, to trade stock
s and other securities
. It may be a physical trading room
where the traders gather, or a formalised communications network.
Creation of a stock exchange is a strategy of economic development
.
Stock markets may affect economic activity through the creation of liquidity.
Liquid equity markets make investment more attractive because they allow savers to acquire equity and to sell it quickly and cheaply. At the same time, companies enjoy permanent access to capital raised through equity issues.
It has been found that countries that open stock markets grow faster, on average, than the control groups.
Market liquidity
may also hurt economic growth, because they make it easy for dissatisfied investors to sell quickly. In addition, issuing shares involves loss of company control, typically to already powerful investors. Foreign ownership of securities and assets is often unappealing. Extremely low income levels keep share ownership beyond the reach of most people in developing countries.
Countries without a stock exchange are Tanzania
and Democratic Republic of the Congo
.
The Mongolian Stock Exchange
was the world's smallest stock exchange by market capitalisation.
In 1688, the trading of stocks began on the London stock exchange
.
. First announced in 2006, the Stock Exchange
was hoping to open during the first quarter of the 2008 fiscal year, though in August 2008 Aguinaldo Jaime
said that the launch would be "a task for the next government... maybe late 2008 or the beginning of 2009".
. It will operate Afghanistan's first liquid exchange to offer the most diverse array of financial products and services. AFX will bring together cash equities exchanges and foreign exchanges, to be the leader for listings, trading in cash equities, equity and interest rate derivative
s, bonds and the distribution of market data in Afghanistan
.
in Malé
. It was first established on 14 April 2002. It is very small, with only 4 companies listed.
, an independent commission modeled after the U.S. Securities and Exchange Commission.
Before the 2003 invasion of Iraq
, it was called the Baghdad Stock Exchange and was operated by the Iraqi Ministry of Finance. Now it is a self-regulated organization like the New York Stock Exchange
, owned by the 50 or so member brokerages.
The trading floor is now open six hours a week.
Trading is done with pen and paper. Buyers shout at or call into their brokers, who stand their white dry-erase boards that list each company's share buy and sell price. This continues despite plans to implement electronic trading
.
Trading was suspended for several months in 2006 due to violence, and is subject to power outages.
The ISX opened to foreign investors on August 2, 2007.
located in Dar es Salaam
, the largest city in Tanzania
. It was incorporated in September 1996 and trading started in April 1998; it is a member of the African Stock Exchanges Association
. There are currently 9 listed companies.
. It is located in Douala
.
It was created in December 2001. Until 2006, its sole listing was Société des Eaux Minérales du Cameroun (SEMC). Now it also includes Société Africaine Forestière et Agricole du Cameroun (SAFACAM).
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
or mutual organization
Mutual organization
A mutual, mutual organization, or mutual society is an organization based on the principle of mutuality. Unlike a true cooperative, members usually do not contribute to the capital of the company by direct investment, but derive their right to profits and votes through their customer relationship...
which provides trading facilities for stock broker
Stock broker
A stock broker or stockbroker is a regulated professional broker who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors...
s and trader
Trader (finance)
A trader is someone in finance who buys and sells financial instruments such as stocks, bonds, commodities and derivatives. A broker who simply fills buy or sell orders is not a trader, as they are merely executing instructions given to them. According to the Wall Street Journal in 2004, a managing...
s, to trade stock
Stock
The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...
s and other securities
Security (finance)
A security is generally a fungible, negotiable financial instrument representing financial value. Securities are broadly categorized into:* debt securities ,* equity securities, e.g., common stocks; and,...
. It may be a physical trading room
Trading room
A trading-room gathers traders operating on financial markets.The trading-room is also often called the front office.The terms dealing-room and trading-floor are also used, the latter being inspired from that of a open outcry stock exchange....
where the traders gather, or a formalised communications network.
Creation of a stock exchange is a strategy of economic development
Economic development
Economic development generally refers to the sustained, concerted actions of policymakers and communities that promote the standard of living and economic health of a specific area...
.
Stock markets may affect economic activity through the creation of liquidity.
Liquid equity markets make investment more attractive because they allow savers to acquire equity and to sell it quickly and cheaply. At the same time, companies enjoy permanent access to capital raised through equity issues.
It has been found that countries that open stock markets grow faster, on average, than the control groups.
Market liquidity
Market liquidity
In business, economics or investment, market liquidity is an asset's ability to be sold without causing a significant movement in the price and with minimum loss of value...
may also hurt economic growth, because they make it easy for dissatisfied investors to sell quickly. In addition, issuing shares involves loss of company control, typically to already powerful investors. Foreign ownership of securities and assets is often unappealing. Extremely low income levels keep share ownership beyond the reach of most people in developing countries.
Countries without a stock exchange are Tanzania
Tanzania
The United Republic of Tanzania is a country in East Africa bordered by Kenya and Uganda to the north, Rwanda, Burundi, and the Democratic Republic of the Congo to the west, and Zambia, Malawi, and Mozambique to the south. The country's eastern borders lie on the Indian Ocean.Tanzania is a state...
and Democratic Republic of the Congo
Democratic Republic of the Congo
The Democratic Republic of the Congo is a state located in Central Africa. It is the second largest country in Africa by area and the eleventh largest in the world...
.
The Mongolian Stock Exchange
Mongolian Stock Exchange
The Mongolian Stock Exchange , located in Ulan Bator, is Mongolia's sole stock exchange. It was established in January 1991 by the decree of the Mongolian Government to privatize state-owned assets, it was the world’s best-performing stock market after a run-up of 121 per cent in 12 months...
was the world's smallest stock exchange by market capitalisation.
In 1688, the trading of stocks began on the London stock exchange
London Stock Exchange
The London Stock Exchange is a stock exchange located in the City of London within the United Kingdom. , the Exchange had a market capitalisation of US$3.7495 trillion, making it the fourth-largest stock exchange in the world by this measurement...
.
Angola
The Angolan Stock Exchange is a proposed stock exchange in AngolaAngola
Angola, officially the Republic of Angola , is a country in south-central Africa bordered by Namibia on the south, the Democratic Republic of the Congo on the north, and Zambia on the east; its west coast is on the Atlantic Ocean with Luanda as its capital city...
. First announced in 2006, the Stock Exchange
Stock exchange
A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and...
was hoping to open during the first quarter of the 2008 fiscal year, though in August 2008 Aguinaldo Jaime
Aguinaldo Jaime
Aguinaldo Jaime is an Angolan political figure. He served as Minister of Finance from June 1990 to April 1992, President of the African Investment Bank , and as Provincial Governor from 1999 to 2002. He was subsequently Deputy Prime Minister....
said that the launch would be "a task for the next government... maybe late 2008 or the beginning of 2009".
Afghanistan Stock Exchange
Afghanistan Stock Exchange is part of the planned Economic development of AfghanistanEconomy of Afghanistan
The economy of Afghanistan has improved significantly since 2002 due to the infusion of multi-billion dollars in international assistance and investments, as well as remittances from Afghan expats. It is also due to dramatic improvements in agricultural production and the end of a four-year drought...
. It will operate Afghanistan's first liquid exchange to offer the most diverse array of financial products and services. AFX will bring together cash equities exchanges and foreign exchanges, to be the leader for listings, trading in cash equities, equity and interest rate derivative
Interest rate derivative
An interest rate derivative is a derivative where the underlying asset is the right to pay or receive a notional amount of money at a given interest rate...
s, bonds and the distribution of market data in Afghanistan
Afghanistan
Afghanistan , officially the Islamic Republic of Afghanistan, is a landlocked country located in the centre of Asia, forming South Asia, Central Asia and the Middle East. With a population of about 29 million, it has an area of , making it the 42nd most populous and 41st largest nation in the world...
.
Maldives Stock Exchange
The Maldives Stock Exchange, is a private sector Stock ExchangeStock exchange
A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and...
in Malé
Malé
Malé , is the capital and most populous city in the Republic of Maldives. It is located at the southern edge of North Malé Atoll . It is also one of the Administrative divisions of the Maldives. Traditionally it was the King's Island, from where the ancient Maldive Royal dynasties ruled and where...
. It was first established on 14 April 2002. It is very small, with only 4 companies listed.
Iraq Stock Exchange
The Iraq Stock Exchange was incorporated and began operations in June 2004. It operates under the oversight of the Iraq Securities CommissionIraq Securities Commission
Iraq Securities Commission, ' is an independent public commission that oversees the activities of licensed securities markets, one of which is the Iraq Stock Exchange.-External links:*...
, an independent commission modeled after the U.S. Securities and Exchange Commission.
Before the 2003 invasion of Iraq
2003 invasion of Iraq
The 2003 invasion of Iraq , was the start of the conflict known as the Iraq War, or Operation Iraqi Freedom, in which a combined force of troops from the United States, the United Kingdom, Australia and Poland invaded Iraq and toppled the regime of Saddam Hussein in 21 days of major combat operations...
, it was called the Baghdad Stock Exchange and was operated by the Iraqi Ministry of Finance. Now it is a self-regulated organization like the New York Stock Exchange
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
, owned by the 50 or so member brokerages.
The trading floor is now open six hours a week.
Trading is done with pen and paper. Buyers shout at or call into their brokers, who stand their white dry-erase boards that list each company's share buy and sell price. This continues despite plans to implement electronic trading
Electronic trading
Electronic trading, sometimes called etrading, is a method of trading securities , foreign exchange or financial derivatives electronically...
.
Trading was suspended for several months in 2006 due to violence, and is subject to power outages.
The ISX opened to foreign investors on August 2, 2007.
Dar es Salaam Stock Exchange
The Dar es Salaam Stock Exchange is a stock exchangeStock exchange
A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and...
located in Dar es Salaam
Dar es Salaam
Dar es Salaam , formerly Mzizima, is the largest city in Tanzania. It is also the country's richest city and a regionally important economic centre. Dar es Salaam is actually an administrative province within Tanzania, and consists of three local government areas or administrative districts: ...
, the largest city in Tanzania
Tanzania
The United Republic of Tanzania is a country in East Africa bordered by Kenya and Uganda to the north, Rwanda, Burundi, and the Democratic Republic of the Congo to the west, and Zambia, Malawi, and Mozambique to the south. The country's eastern borders lie on the Indian Ocean.Tanzania is a state...
. It was incorporated in September 1996 and trading started in April 1998; it is a member of the African Stock Exchanges Association
African Stock Exchanges Association
The was incorporated in 1993 in the Republic of Kenya. ASEA's aim is to provide a formal framework for the mutual co-operation of stock exchanges in the African region. Its functions include the exchange of information and assistance in the development of member exchanges.There are 29 exchanges...
. There are currently 9 listed companies.
Douala Stock Exchange
The Douala Stock Exchange is the official market for securities in CameroonCameroon
Cameroon, officially the Republic of Cameroon , is a country in west Central Africa. It is bordered by Nigeria to the west; Chad to the northeast; the Central African Republic to the east; and Equatorial Guinea, Gabon, and the Republic of the Congo to the south. Cameroon's coastline lies on the...
. It is located in Douala
Douala
Douala is the largest city in Cameroon and the capital of Cameroon's Littoral Province. Home to Cameroon's largest port and its major international airport, Douala International Airport, it is the commercial capital of the country...
.
It was created in December 2001. Until 2006, its sole listing was Société des Eaux Minérales du Cameroun (SEMC). Now it also includes Société Africaine Forestière et Agricole du Cameroun (SAFACAM).
See also
- Emerging marketsEmerging marketsEmerging markets are nations with social or business activity in the process of rapid growth and industrialization. Based on data from 2006, there are around 28 emerging markets in the world . The economies of China and India are considered to be the largest...
- List of countries by Failed States Index
- Development aidDevelopment aidDevelopment aid or development cooperation is aid given by governments and other agencies to support the economic, environmental, social and political development of developing countries.It is distinguished...
- Least Developed CountriesLeast Developed CountriesLeast developed country is the name given to a country which, according to the United Nations, exhibits the lowest indicators of socioeconomic development, with the lowest Human Development Index ratings of all countries in the world...
- List of stock exchanges
- African Stock Exchanges AssociationAfrican Stock Exchanges AssociationThe was incorporated in 1993 in the Republic of Kenya. ASEA's aim is to provide a formal framework for the mutual co-operation of stock exchanges in the African region. Its functions include the exchange of information and assistance in the development of member exchanges.There are 29 exchanges...
- World Federation of ExchangesWorld Federation of ExchangesThe World Federation of Exchanges , formerly FIBV - Federation Internationale des Bourses de Valeurs , is an international organization for securities and derivative markets such as stock exchanges....
Papers
- Atje, R. and Jovanovic, B. (1993). Stock Markets and Development. European Economic Review, 37 (2), 632–640.
- Demirg ̈ ̧-Kunt, A. and Levine, R. (1996). Stock Markets, Corporate Finance, and Economic Growth: An Overview. World Bank Economic Review, 10 (2), 223–239.
- Goldsmith, R. W. (1969). Financial Structure and Development. Yale University Press.
- Minier, J. A. (2000). Are Small Stock Markets Different?. Manuscript.