The Political Economy of Global Stock Exchange Competition
Summary
This article, based on a paper by Curtis J. Milhaupt and Wolf‑Georg Ringe, argues that the conventional “race for IPOs” framing of exchange rivalry is incomplete. Exchanges now function as strategic assets at the nexus of commercial aims, national policy and geopolitical rivalry. IPO competition remains visible and symbolically important, but listing fees are a small share of exchange revenues compared with data, analytics and other services — and private capital is a growing alternative to public listings.
Key Points
- IPOs are no longer the dominant revenue driver for exchanges; data and analytics and other services matter far more.
- Demutualisation has turned many exchanges into profit‑seeking corporations, reducing the relative importance of listing fees.
- Private capital (PE, VC, private credit) has ballooned, competing with exchanges for firms that might otherwise IPO.
- States are active stakeholders: exchanges deliver tax revenue, jobs, and help prevent corporate relocation.
- Exchanges are increasingly instruments of economic statecraft — used for financial sovereignty, national security screening and normative policy transmission.
- Cases like Shein’s aborted US/London route and eventual Hong Kong listing illustrate how regulators and governments shape market access for geopolitical and political reasons.
- Efforts to harness exchanges for strategic ends risk fragmenting global capital markets and undermining their purely economic functions.
Content Summary
The authors challenge the “race to the bottom” view that treats listing competition as primarily driven by regulatory arbitrage. They show that many firms list in the US not because of weaker rules but for liquidity, visibility and market depth. Listing fees are a small fraction of exchange income (eg, ~3% for LSE, ~10% for NYSE). Private markets have grown massively — assets under management in private capital rose from $9.7tn in 2012 to over $24tn by 2023 — and take‑private deals have outpaced IPOs since 2022.
Governments care about their exchanges for three broad reasons: direct and indirect economic benefits (taxes, jobs, capital formation); fear of corporate exodus and loss of headquarters/talent; and home bias in investor behaviour which authorities can reinforce. Exchanges are now deployed as geopolitical tools in rivalries such as US–China tensions, and in regional projects like the EU’s Capital Markets Union, which now incorporates geopolitical and sovereign policy aims. Other jurisdictions — Singapore, India, Israel, Japan — explicitly link listings and exchanges to national strategy and resilience.
Context and Relevance
This piece reframes how policymakers, investors and market participants should think about exchanges: not merely as neutral market infrastructure competing for flashy listings, but as multi‑dimensional instruments that serve commercial, regulatory and geopolitical ends. For anyone tracking cross‑border listings, regulatory changes, or the interaction between markets and state policy, the article explains why market outcomes increasingly reflect state strategy as much as pure market economics. The authors caution that politicising exchanges can fragment capital markets and hinder their economic role.
Why should I read this?
Quick and blunt: if you follow listings, market structure, or geopolitics, this explains why exchanges matter way beyond listing fees. It saves you time by cutting through the tired “race to the bottom” line — and shows where the real levers are now (data, private capital, and state power). Read it to understand the new chessboard for capital markets.