Argument for Mini Regional Stock Exchanges: Toward Disaggregation of Economy

Abstract

The objective of this manuscript is to present the arguments in favor of mini regional exchanges facilitating the trading of stocks for local and regional businesses. The mini stock exchange model proposed is not the replication of major national exchanges listing the same set of firms listed elsewhere; rather it is an attempt to extend the financial capital markets to local, small and regional firms in the respective geographic regions. The proposal is based on the following premises. First, mini regional exchanges will enable the availability of financial resources and capital to the multitude of small and medium scale businesses that would be at a disadvantage compared to large, national and global enterprises that are listed in major national stock exchanges. Second, the mini exchanges can mitigate, as typical stock exchange would do, the risk of investment in businesses by spreading and distributing the risk and ownership of the major portion of national industrial assets, and in turn contribute substantially to the growth of millions of young entrepreneurial ventures and the larger economy. Third, Mini stock exchanges decentralize the asset structure of national economies, and localize the control and rewards, and can enhance the distribution of economic gains to larger section of the economy. Fourth, by decentralizing and localizing the stock exchange, regional and locally located small and medium scale would be availed with opportunity to raise funds and grow without relying only on debt financing from banking sector. Fifth, mini regional stock exchanges would greatly reduce information asymmetry - a phenomena that substantially contribute to the risk factor for investors - and facilitate a large number and portion of investors to participate in mechanisms such as Board of directors. Sixth, more importantly, large national markets are receiving enormous flow of surplus capital to the extent of oversubscribing the stocks of popular and large firms, increasing their demand, widening the price-earnings ratio and in turn increasing the investment risk to individual investors and economic hazards to national economies.