Strategic alliances and mergers of financial exchanges: The case of the SADC

Abstract

Over the last three years there has been increased speculation in Europe and elsewhere as to the relative merits of merging a number of national and international financial exchanges. In some respects, the development of financial markets is an important aspect of economic development, and several countries in the Southern Africa Development Community region have a financial exchange. However, the vast majority of these exchanges have a small number of listed securities and low levels of capitalisation and liquidity. The design, size, scope, institutional and regulatory framework of a financial exchange determines its relative costs and benefits. Seen in this light, without the appropriate scale, liquidity, social and technological infrastructure, it is unlikely that a financial exchange will be able to meet its strategic objectives efficiently. This article discusses the economic case for establishing a regional financial exchange for the Southern African Development Community. It suggests that the most economically efficient and least costly way of accomplishing this is for the national exchanges in the SADC region to merge. The article concludes by suggesting a number of enabling policy proposals. © 2005 Journal of Southern African Studies.