processes of global transformation of stock exchanges through the mechanisms of internationalization,

corporate and network consolidation, and technology:

r, the scope of competition has broadened from the national to the international level. While
yesterday's competitors were, for example, domestic exchanges such as NYSE and NASDAQ, today's
competition is between large consolidated groups operating in an internationalised financial market
place. The emergence of international exchange groups in fact mirrors the evolution of the listed
companies sector itself. Historically, the focus of exchanges was on attracting domestic issuers, which
encouraged competition for listings among different national exchanges. As this focus has shifted on
attracting large international companies, including foreign ones, exchanges' basis of operations has
shifted accordingly. Competition between exchanges, both for domestic and foreign listings, has
therefore intensified.

To the extent that the relevant laws or securities regulation already address corporate governance of
listed companies, the role of exchange regulation can therefore only be complementary. For instance,
rules on prospectus issuance follow largely from national securities law, and international harmonisation
initiatives (notably the EU Prospectus Directive) may have further limited the scope of standards setting
by exchanges. Even in jurisdictions where exchanges are empowered to issue regulations, they may be
subject to an approval by another regulatory authority, e.g., in the United States, proposed changes to
exchange rules must be filed with the SEC.

Globalisation of Financial Markets

cross-border securities transactions have grown very rapidly. A quarter of stock market
trades worldwide involved either a foreign security or a foreign counterparty

With the formation of the European Union, cross-border trading in Europe is growing in
popularity. The introduction of the euro and a wider acceptance of equity as a financing
tool are encouraging investors in Europe to engage in more cross-border transactions in
search of profit-making opportunities. Yet despite the appeal of cross-border trading,
most stock exchanges in Europe are national institutions that trade only local, country-
specific stocks

This market structure appears to be changing, however, as an increasing number of

stock exchanges are attempting to operate across national borders. A Transaction
Survey done by Hong Kong Stock Exchange in 2000 indicated that overseas investors
(mainly institutions) had significantly increased their participation in the Hong Kong
market. In Europe several ambitious initiatives have been undertaken of late to create,
through mergers or other consolidations, pan-European exchanges that offer trading in
stocks from many European countries. The establishment of these exchanges will likely
lead to important benefits for the financial markets. For example, a standardization of
trading platforms across exchanges, an increase in market liquidity, and a reduction in
market fragmentation potential by-products of consolidationcould help minimize the
costs and problems associated with cross-border trading in Europe.

internationalization in stock markets:

internationalization has a negative impact on domestic stock market liquidity

When a firm cross-lists or issues depositary receipts in an international public exchange (e.g., the NYSE),
we find that the trading of the firm’s shares tends to migrate out of the domestic market and into the
international market.

policymakers concerns that firms that cross-list or issue depositary receipts in major public exchanges
facilitate the migration of trading out of the domestic market, which hurts the liquidity of domestic
firms.

competition between stock exchanges

The evolution of new financial instruments, the falling monopoly of banks as a source of direct
funding to borrowers and of direct investment for investors, the tremendous improvement in
information technology, and a greater financial culture among people as well as the fluctuations
in interest, price, and exchange rate due to the oil crises have caused the increasing importance
of securities markets in the financial system, both as regulated exchanges and over the counter
(OECD, 1996). New theories of financial intermediation (Allen and Santomero, 1996; Allen and
Gale, 1997) underline the importance of the markets in such a way that all intermediaries (banks,
mutual funds, etc.) perform a risk-management activity in between borrowers and lenders on
one side and markets on the other, providing a kind of risk insurance. In spite of that, banks and
markets can still coexist

Emerging competitors: Alternative Trading Systems

alternative trading platforms (ATS ) became increasingly prominent, allowing market participants to
effectively circumvent exchanges as trading venues. Their initial appearance was in the United States
dates back to late 1960s, where a type of ATS termed the electronic communication networks (ECNs)
entered the markets. It soon became clear though that ECNs could execute transactions as effectively as
the incumbent exchanges and they soon began to capture a sizeable share of trading in certain
instruments.

What is Dual Listing?

Dual listing is when a company’s shares are listed on two or more different
exchanges in addition to its domestic exchange for the purpose of adding liquidity to
the shares and allowing investors greater choice in where they can trade their
shares.
Capital market integration, process by which capital markets are integrated with one
another rather than segmented, leading to a convergence of market risk and price. The
global integration of capital markets is at once a principal driver of globalization and a
hallmark of the increasingly globalized economy.
A joint stock company can be a private company (private limited) or an unlisted public

company or a listed public company. The most common entity in the world is the

private limited company, meaning a corporation that was incorporated to be owned by

a limited number of people and that is unlisted