Technology, automation, and productivity of stock exchanges:: International evidence

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 efficiency - across these exchanges. On average, North American exchanges are found to be most cost and revenue efficient. 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 efficiency. Moreover, organisational structure and market competition are found to be significantly associated with both cost and revenue efficiency for the exchanges studied, whereas market size and quality are related only to revenue efficiency. (C) 2003 Elsevier B.V. All rights reserved.