Edited by Geoffrey Poitras
Chapter 7: Demutualization and the Globalization of Stock Markets
Giovanna Zanotti INTRODUCTION Contemporary stock exchanges are the result of a long transformation process that started in January 1993 when the Stockholm Stock Exchange changed its structure from a cooperative owned by members into a for-profit company with ownership opened to outsiders. Before this date, stock exchanges were characterized by the identity of owners and traders who formed a cooperative with a limited number of members. Exchanges were not managed for profit but for the benefit of the members. Decisions were taken in the form of one vote for each member. In some other cases, for example in some European countries, exchanges were under government control. Starting from the final decade of the twentieth century, exchanges radically changed their governance. In the new governance structure, the identity between members and owners has been eliminated, the exchange is run for profit and the decisions are taken on a one share, one vote basis. Furthermore, until 1998 there were no publicly traded exchanges. In 1998 the Australian Stock Exchange first decided to go public and to list its shares. This process is known as demutualization and it is considered to be one of the major changes that has occurred in global capital markets in the last decades. Table 7.1 gives a summary of the demutualization process up to the demutualization of the New York Stock Exchange in 2006 and of the major stock exchanges that were involved in the process. In this chapter, the determinants and the implications of demutualization are examined....
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