By Liao Li, Chair Professor and Executive Associate Dean of Tsinghua University PBC School of Finance (PBCSF), and Chair of Institute for Fintech Research (IFR), Tsinghua University
Stock Exchange, with its unique function of resource allocation, provides the inexhaustible motivation for economic development. Drawing lessons from the development history of European and American stock exchanges, the stock exchanges have gradually become the key platform connecting the real economy, capital and science and technology in China. Through years of development, it shoulders the mission of serving the development of science and technology and the real economy.
Yi Huiman, chairman of the China Securities Regulatory Commission (CSRC), pointed out that the stock exchange, as the organizer and defender of the market order, is an important infrastructure to ensure the market safety and efficiency.
Since the establishment of the Amsterdam Stock Exchange in Netherlands 400 years ago , stock exchange industry from different regions have followed varied development patterns. In the 21st century, due to the rapid development of information technology and continuous economic globalization, the stock exchanges have been expanding their business scale and consolidating their market position globally. They have become global exchange groups with large market value, diversified products, and abundant customer resources. This also shows obvious agglomeration phenomenon in the global stock exchange.
Besides the respective development, the competitions between the stock exchanges are still fierce. Some stock exchange groups are developing towards foreign exchange and commodity trading, some to post-trading service, and others to data and index influences. Generally speaking, the present global stock exchange groups focus more on non-trading businesses than ever before. And it is considered as future growth breakthrough.
The development and innovation of the stock exchange industry is not only driven by the old influential stock exchange groups, the new starters are also attempting to overrun the existing development pattern with their technological advantages. In September 2020, three new exchanges (MEMX, LTSE, and MIAX PEARL) were licensed on the American National Stock Exchange. Some of them try to challenge the old stock exchange groups with low prices, while some find their success through other approaches. e.g. IEX puts limits on traditional "high-frequency traders", protecting retail traders. As a successful market segment, IEX wins its place in the increasingly fierce competition.
Facing the constant challenges from the new starters, traditional exchange groups are exploring the non-trading business through digital transformation. In the past two years, NYSE and NASDAQ have been actively exploring measures including Direct Public Offering (DPO) and Special Purpose Acquisition Company (SPAC) to compete and make their standing in the market.
The rapid development of technologies and financial innovation has brought unprecedented challenges to the traditional management and operation modes. New demands are raised for the stock exchange in China, to which the Beijing Stock Exchange is established. It is of great significance to improve the function of the capital market, and also support the innovation-driven development of the small and medium-sized enterprises. Looking into the future, how China's stock exchanges learn from the experience of global exchanges and continue to contribute to the sustainable development of China's economy is worthy to be discussed.
