Abstract

The Role of Regional Stock Exchanges on the German Capital Market Today and Tomorrow (Part I)

The discussion about the future structure of the German stock exchange sector follows the beaten track. Most observers deem it a fact that the fragmentation of stock trading among eight stock exchanges – excluding the German Future Exchange (Deutsche Terminbörse (DTB)) – is harmful to the Federal Republic of Germany as a financial centre and reduces the liquidity of its stock markets. Those who advocate socalled regional stock exchange run the risk of being blamed for pursuing a narrow-minded policy, although it is not at all clear as yet what the functions of regional stock exchanges are and what the liquidity of German shares is. This contribution takes account of research results concerning the microstructure of securities markets and attempts in overall economic policy terms to make the discussion more objective. It outlines in detail the perspective now prevailing which is considered to represent a centralist and technocratic position. It contrasts with the competition-based approach deemed to have been academically substantiated in the USA where it is the main characteristic of stock exchange policy. This perspective relies, in the pricing process, on the integration of submarkets through communication well known from the foreign exchange markets and regards competition among domestic stock exchanges as an innovative procedure which ensures that stock trading services are available in the demanded quality and at attractive prices to the benefit of investors and – ultimately – issuers as well as the ability of national capital market to perform.