1. 30-May-2007
Building a global exchange
Thomas Roughan, Managing Principal, Capco and Jeni Incontro, Consultant, Capco
Introduction
Survey says: “70 Percent of Wealthy Investors Look Abroad”…E-Trade launches international trading…NYSE and Euronext to
combine…China decline triggers fall in global markets…NASD and OMX to combine…
There’s been a lot happening in the global investment space lately. Ten years ago it would have been hard to believe that a drop
in the Shanghai exchange would trigger a global sell-off, or that national champions such as the NYSE and NASD would be
looking for merger partners in Europe.
Global Growth
However, since the fall of the Berlin Wall in 1989 the world of stock exchanges has changed dramatically. In order to understand
the growth in the number of stock exchanges world-wide, we performed a top-down analysis at the country level.1
The
International Standards Organization (ISO) demarcates the planet into 244 countries / territories. The World Bank has population
and economic figures for 209 of them.
In 1988, stock exchanges existed in 63, or 26% of these countries. These countries comprised 58% of global population and 81%
of global GDP (PPP basis). Once the Wall fell in 1989 however, exchanges started to blossom everywhere.
Number of Countries with Stock Exchange
0
2
4
6
8
10
12
1585 1792 1808 1850 1861 1869 1875 1881 1890 1894 1912 1929 1953 1960 1969 1975 1981 1986 1990 1993 1996 1999 2002 2005
Year
#New
0
20
40
60
80
100
120
140
160
#Cumulative
# New # Cumulative
By 2005, there were national or regional stock exchanges present in 145, or 59% of ISO countries, which together comprised
92% of the world’s population and 99% of global GDP (PPP basis). Looking ahead, Libya, Cambodia, Sierra Leone and
Gibraltar have all announced plans to develop exchanges in the next two years.
The remaining 95 ISO countries constitute roughly only 1% of global GDP. There are 65 countries with population counts which
range from approximately 20,000 in Palau to 73 million in Ethiopia. The bulk of these, approximately 50 countries, have
populations under 10 million. The remaining 30 countries are small islands with limited or no population.
In summary, institutional and legal frameworks and infrastructure for stock trading have been established in virtually all of the
world’s significant economies at this point.
1
As well as stock exchanges, there has also been high growth in the number of fixed income and derivatives exchanges. For the purposes of this
study, fixed income and derivative only exchanges were excluded. Many of the stock exchanges included in the study list and trade multiple
instrument types, but all trade common shares at a minimum.