On the presence and market-structure of exchanges around the world

We investigate the cross-section of 256 financial exchanges throughout the world. First, we empirically analyze the country characteristics that are related to having a financial exchange. Second, we investigate the determinants of an exchange's choice of trading mechanism, and third, we examine whether the presence of an exchange in a country impacts the domestic country's economy. We find that the main determinants for an exchange to exist in a country are the size of the economy, trade policy, foreign investment, development of the banking sector and the legal system. Our results show that the choice of trading mechanism depends on the number of assets traded and the legal system. Lastly, we find that the presence of an exchange is associated with a reduction in the growth of the monetary aggregates but is not associated with other measures of domestic growth and productivity.