Derivative Listing Strategy : The Case of the Athens Exchange

The increased demand for managing risk in a volatile and structurally different economic environment contributed to the establishment of many derivatives exchanges in the 1970's. In addition, the major success of the derivatives markets worldwide, should reflect the effectiveness of the corresponding regulative authorities. However, a very interesting issue that matters both to academicians and practitioners is the necessity and/or the usefulness of Financial Market Regulation. This topic has many alternative dimensions, one of which concerns the derivatives listing. In this context, our paper proposes a theoretical framework for derivatives listing decisions, according to which the main objectives of the regulative authorities is both the profitability of the derivatives exchange's members and the prosperous performance of derivatives markets. Furthermore, we examine empirically the specific criteria that govern the regulation process with respect to the derivatives listing in the Athens Derivatives Exchange (ADEX), taking into account the capital market standards, the creditworthiness and the hidden managerial characteristics of the derivatives candidates. According to our empirical results, although the ADEX's regulative authorities consider mainly the corresponding capitalization in the derivatives listing decision, it is shown that a more sophisticated methodology might be used, with important implications for the management board of the ADEX