Abstract
Since the development of global stock markets has
become standardised and increasingly linked to the philosophy of free markets,
the top international private providers of equity indices (e.g. FTSE Russell,
MSCI and S&P) have been working with market authorities to regularly
determine the classification of stock markets across their entire index
universe as an ‘objective’ ranking of markets as ‘frontier’, ‘emerging’, or
‘developed’. These classifications criteria have created uniform international
market standardisations which are designed around a small number of
international institutional investor communities in developed and rich
countries. A hectic race to adopt these international market standards and
increasing regulatory convergence with ‘pioneer’ and liberalised markets are
deeply entrenched in the agenda of the majority of the policymakers in the
emerging market economies, including the Gulf Cooperation Council (GCC) states.
A question arises as to whether emerging stock markets ought to adopt this regulatory
approach.
Following numerous global financial crises, a scepticism and significant debate
on the development of stock market regulations, best practices, standards and
standardisation, structures and infrastructures are prompted. It is not self-evident
that stock markets classification and market standardisation ensure better-run
corporate activities and efficient, effective and fair markets. The purpose of
this thesis is to critically examine the efficiency, effectiveness and fairness
of the attempts to modernise the policies and regulations concerning the Dubai
Financial Market’s (DFM) accessibility and operational framework to conform
with international standards and the best practice models of the US and UK.
This thesis sets out a comparative analysis approach between three
jurisdictions, Dubai, the US and UK and is further explored by conducting
in-depth expert interviews. It builds on the theoretical expectations derived
from policy learning and policy convergence theories (PCT), more specifically
the evolution theories in law and market development that predominantly employ
analogies of Darwinian natural selection. The thesis detects that market
evolution and rule change as evolutionary stages in legal development would
neither be predominantly described by Darwinian natural selection nor as an
inexorable natural process. Three models of pressures, namely ‘top-down’,
‘middle-up’ and ‘bottom-up’, have been empirically proposed, which impact the
configuration of market structure, law and regulation. These models provide a
rational elucidation regarding the dynamics of the stock market and its
regulatory evolution, explaining why markets might become more similar or
remain dissimilar over a specific period of time and, thereby, establishing a serious
concern regarding the market standardisation and that the regulatory practices
and market structures of the developed stock markets are not always working for
the emerging market, nor are they fit for purpose.
The international market standards and best practices could potentially: (i)
inspire policy measures to strengthen the resilience of the DFM, including the
availability of adequate resources to absorb shocks across markets; (ii)
enhance the regulatory capabilities of the DFM by increasing the stock
valuations and scaling down the cost of capital; (iii) improve the trust levels
between international investors and the DFM and (iv) deploy good and sound
governance practices. Whilst orthodoxy of regulatory and structural reforms and
improvements in market infrastructure are fundamental to boost the confidence
of domestic investors and attract and retain international investors, the
thesis principally cautions against the notion that reclassification of the
stock market is a panacea for market ills or underperformance. To balance
between the above-mentioned theoretical concerns and practical advantages, this
thesis concludes with policy and regulatory recommendations.
This thesis is significant, at this particular time, for the United Arab
Emirates as its economy is characterised by the low foreign investments flowing
to the DFM due generally to the (i) COVID-19 pandemic, (ii) sharp fluctuations
in oil prices and (iii) specific market accessibility restrictions and market
operational framework. This thesis provides a ‘development and infrastructure
toolkit’, allowing high engagement with further development of market
agenda-setting theory and practice. In doing so, market-advocates, even more
than market-sceptics, stand to gain from such assessment the realisation as to
whether the increased similarity of the DFM’s accessibility and market
operational framework with ‘pioneer’ jurisdictions is a beneficial approach. It
distinctly contributes by (i) identifying how the stock market authorities
behave as rule-makers in response to the international standards and the best
practice models, whether the market and its rules evolve consistently or
episodically and why the market structures and regulations are evolving the way
they do; (ii) investigating whether the laws and regulations relating to the
DFM’s current market accessibility and the operational framework are adversely
affecting the market’s development and whether an open-access market approach
and a developed market operational framework designed by global private indices
providers are feasible for this particular emerging stock market; and (iii)
assessing the distinction between the perception of the restrictions and
stringent rules imposed on market accessibility and market operational
framework, and the reality in practice. The thesis should, therefore, be of
much value to the academic field, market authorities, policymakers as well as
the intergovernmental and private standards-setter bodies.
Date of Award | Jul 2021 |
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Original language | English |
Awarding Institution |
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Supervisor | Dieter Pesendorfer (Supervisor) & Marek Martyniszyn (Supervisor) |
Keywords
- Stock market classification
- market development
- equity indices providers
- emerging stock market
- developed stock market
- standardisations market
- International Standards
- regulatory convergence
- regulatory divergence
- policy convergence
- policy learning
- Gulf Cooperation Council (GCC)
- market accessibility
- market operational framework
- market infrastructure
- evolutionary theory
- market structure
- ownership structure
- regulatory evolution
- market evolution
- Standards-Setter Bodies
- market authorities
- policymakers
- Darwinian Natural Selection
- role change
- market Evolve
- Free Market
- market efficiency
- best practice models
- best practice
- FTSE Russell
- MSCI
- S&P
- one-size-fits-all’ approach
- disparate ownership
- IOSCO
- ICMA
- WFE
- US Market
- UK Market
- meme
- market governance
- COVID-19 Pandemic
- foreign investments
- law and finance
- law, finance and market development
- stock market architecture
- market-based orthodoxy
- institutional theory