Evolution of Ukrainian Stock Exchanges: Geographical and Institutional Factors

Abstract

This study finds no direct correlation between the development level of stock markets in post-socialist countries and the involvement of stock exchange operators from more developed markets in local market infrastructure. It analyzes the competitive landscape and ownership structure of Ukraine’s leading stock exchanges. The article identifies the prerequisites and consequences of Russian exchanges’ corporate and technological influence on Ukraine’s organized stock market. It highlights the challenges of selecting a strategic investor to support the development of local stock exchange’s infrastructure within an immature capital market, especially amid rising geopolitical tensions and expanding sanctions. The research argues that Ukrainian stock exchanges’ refusal to operate as public companies or list their own securities on the regulated market, as well as their failure to comply with certain rules and requirements that they impose on issuers and investment firms (including those concerning minority shareholder rights and financial capacity), has undermined trust in exchanges as key component of the capital markets’ institutional environment. The study reveals fundamentally different regulatory responses to licensing violations by stock exchanges, depending on their market share, financial instruments and the role of key trading participants in the financial system. It also examines the historically limited interest of leading global stock exchanges in entering the Ukrainian stock market and finds that most of the underlying factors remain relevant today. The paper notes a recent resurgence in mergers and acquisitions within the European stock exchange’s landscape, which is an important trend for Ukraine, given its national policy of integration with the EU economy and capital markets. This integration could be pursued by attracting a strategic investor to create a vertically integrated holding company comprising a stock exchange and post-trade infrastructure entities. Finally, the study summarizes the challenges faced by capital market participants due to past reductions in the number of stock exchanges and outlines the implications of the anticipated monopolization of Ukraine’s local stock exchange services market in the context of European integration.