A countrys development is most likely seen through its financial and business climate. The [618104]

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INTRODUCTION

A country’s development is most likely seen through its financial and business climate. The
stock market also contributes to the nation's economy because the financial markets are very
sophisticated.
The topicality of the graduate paper is seen through the fact that the stock market can serve
as an indicator of a nation’s fiscal health, broadcasting the ups, downs, trends and shifts that are the
benchmarks of a society’s financial infrastructure. The symbiotic relationship between a society
and its stock exchange can be synchronized to such a high degree that prognosticators and analysts
can develop confidence that encourages more investing based on the previous performan ce of
products and the health of the companies issuing these stocks.
The role of the graduate paper consists in argumentation of the importance and impact of the
volume of the stock transactions on an economy. The direct effect of stock market activity can
impact a nation’s economy in multiple ways. Stocks fall, spending stops, consumers lose
confidence and a nation's financial state begins to falter. Conversely, stocks rise, confidence
spreads, spending and investments grow. A nation’s mood can rise or fal l on stock market activity
and performance, which shows how important the role played by a stock exchange can be in a
society’s social and fiscal fabric.
The graduate paper presents a statistical analysis of the available data on stock exchange
transactio ns in Europe for a period of 30 years. In this context, the volume of stock transactions is
one of the decisive elements of economic growth, therefore appears the necessity of improvement
of the stock transaction climate. The aim of the graduate paper is t o analyze the volume of the stock
transactions and their impact on the country’s social and economic development. The objectives of
this work are realized through:
– Presenting the theoretical approach of stock transactions;
– Acknowledgement of stock tran saction’s significance for a country’s economic development;
– Specifying the general premises for stock exchange transactions Europe;
– Pointing out the main factors of the stock transactions in the Republic of Moldova;
– Indicating the key points of th e Republic of Moldova.
– Analysing the statistics of the main indicators concerning the stock exchange transactions in
European Union

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– Presenting the main characteristics of the Stock Exchange of the Republic of Moldova and
analysing possible opportunitie s and strategies of development
The graduate paper also provides a comparative analysis of international policies regarding
stock market transactions and the national background for stock market transactions based on the
local national policies, all being proposed to improve the current stock market transaction process.
In relation to the term of stock market there should be analyzed alongside term of capital
market, especially in case of the Republic of Moldova – where Capital market is a broader term
that includes the stock market and other venues for trading financial products. The stock market
allows investors and banking institutions to trade stocks, either publicly or privately. Stocks are
financial instruments that represent partial ownership of a c ompany. These are basically documents
that are used extensively by companies as a means of raising necessary capital. Within the stock
market itself are primary and secondary markets that trade among banks underwriting stock and
public investors trading st ock, respectively. Capital markets may trade in other financial securities
including bonds, derivative contracts such as options, various loans and other debt instruments, and
commodity futures. Other financial instruments may be sold in capital markets an d these products
are becoming increasingly sophisticated. Some capital markets are available to the public directly
while others are closed to everyone except large institutional investors. Private trade, mostly
between large institutions with high -volume trades, occurs via secured computer networks at very
high speeds. These markets all trade financial securities, so they are all capital markets. The stock
market is a very significant portion of the total volume of capital market trades. The Moldovan
stock exchange and capital market is very young and is trying hard to conform to international
standards. Its evolution hasn’t still reached the level of investors’ expectations and is facing serious
problems.
Informational and methodological basis of the thes is based on the systemic approach and
use of different methods, most commonly being employed the normative method, statistical method
and dynamic graphics. Also there were used other research methods of which can be listed:
comparative analysis, document a nalysis, economic analysis, synthesis, inference and other
methods and tools of scientific knowledge of social and economic processes. Theoretical and
scientific support is the work in economics and management, developed by authors such as R.
Gilson, S. Br ammer, R. Arnott, D.P. Broby, V. Iordachi, M. Rosca, R. Hîncu, etc.
Information is based on research publications of international organizations such as: World
Federation of Exchanges and Art. 8 of The Law of the Republic of Moldova concerning the

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National Commission of Financial Market, no. 192 -XIV from November 12, 1998; Law nr. 171
from 11.07.2012 „On capital market” and other legislative acts in force.
An important aspect of the research process was based on the experience gathered through
the period of performing the internship at “ARC” Publishing House. The benefit of insider
consisted in the availability of information concerning the latest projects i nvolving regulation on
stock exchange in the Republic of Moldova, potential partnerships between the company and the
international community, investment perspectives of the company (outlining the key points of the
opportunities that the Initial Public Off er might offer for the company and what are the tendencies
concerning the stock market of the Republic of Moldova).
The structure of the undergraduate thesis is divided into three main chapters. First chapter
“Theoretical and practical approach of stock m arket transactions and their significance for a
country” regards the academic and accustomed concept of stock transactions and their importance
for a country’s economic development, having three subchapters that describe the concept and
importance of stock market transactions for a country’s economy.
Second chapter “Stock market analysis : its impact on the transactions volume” describes
the background for the stock market transactions in the European Union.. It has three subchapters,
which reflect the lega l and institutional frame on investment activity in the European Union and
presents a statistical analysis based on the evolution of the stock market transactions in the
European Union.
Third chapter “Stock market transactions in the Republic of Moldova: challenges and
opportunities” focuses on presenting the stock transaction activity in the Republic of Moldova. The
last chapter has three subchapters, which show an overview of the stock market in the Republic of
Moldova, Legal framework and stock market development of the Republic of Moldova.
Conclusions presented at the end of this work, summarize the importance of stock exchange
transactions in the economy of the European Union and in Republic of Moldova. Considering the
necessity of increasing the awar eness of the possibilities the stock market might offer for the
companies from the Republic of Moldova, there were formulated potential solutions in form of
recommendations to the national and regional authorities of the country, development agencies and
other related institutions.

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CHAPTER I THEORETICAL AND PRACTICAL APPROACH OF STOCK MARKET
TRANSACTIONS AND THEIR SIGNIFICANCE FOR A COUNTRY

1.1. Concept and importance of stock market transactions for a country’s economy

Nowadays, stock market tran sactions have a very significant role in contributing to the
growth of any country’s economy. From a theoretical point of view, a stock market is defined as
‘‘the aggregation of buyers and sellers, a free network of economic transactions, not a physical
facility or discrete entity of stocks (also called shares), which represent ownership claims on
businesses’’. These may include securities listed on a public stock exchange as well as those only
traded privately. Examples of the latter include shares of pri vate companies which are sold to
investors through equity crowd funding platforms. Stock exchanges list shares of common equity as
well as other security types, for instance corporate bonds and convertible bonds.
Initially, the first stock markets were est ablished in 17th century London coffee houses. In
place of the sleek electronics and frenzied trading floors typical of today’s market, people
interested in owning commercial shares of businesses came to places like Jonathan’s Coffee House.
There, innovato rs such as John Castaing posted stock and commodity prices for “marketable
securities in London,” according to the London Stock Exchange’s historical record. 1This was the
“earliest evidence of organized trading,” moving from coffee houses to an actual exchange on the
3rd March 1801.
Stock markets are primarily financial institutions established to help businesses and
entrepreneurs come together to buy, sell and trade shares for the purpose of capitalizing enterprises
in need of cash infusions. Were it n ot for stock exchanges, entrepreneurs would be left to their own
devices to find investors, and consumers could wind up at the mercy of unlicensed and unregulated
financial products with no oversight. Emerging from the stock market system are unique financ ial
terms and concepts including initial public offerings, or IPOs, an international acronym for new
business stock introductions.

1 LEAF GROUP; The Impact of the Stock Exchange Market in Economic Development ; Finance – Zacks. Zacks,
published on 07 Feb. 2017. Accessed on 4 May 2017; available online at http://finance.zacks.com/impact -stock –
exchange -market -economic -development -8358.html

7
Stock markets have the capability to act as an intermediary for large and small investors
seeking to make money outside the r ealm of standard banking institutions. The role of a stock
exchange in an economy is to maximize return on savings that might otherwise languish in static
bank accounts with low returns. Stock exchanges promise and often deliver higher profits, and in
return, investors receive measures of assurance, diverse opportunities and flexibility. Furthermore,
a stock exchange offers investors assurances via formal oversight on investments.
A stock exchange can serve as a barometer of a nation’s fiscal health, broadc asting the ups,
downs, trends and shifts that are the benchmarks of a society’s financial infrastructure. The
symbiotic relationship between a society and its stock exchange can be synchronized to such a high
degree that prognosticators and analysts can de velop confidence that stimulates more investing
based on the previous performance of products and the health of the companies issuing these
stocks.
Sophisticated financial market systems require credibility and accountability if they are to
function on beh alf of businesses and investors as interested in ethics as they are in profits. For this
reason, a stock exchange benefits from a formal structure upheld by rules, laws and regulations.
Management and operational standards set by governments, bureaus and a gencies overseeing stock
exchange operations add authority and oversight to the institution, giving stockholders, investors
and businesses checks and balances necessary for investor confidence. The direct effect of stock
market activity can influence a nat ion’s economy in multiple ways. Stocks fall, spending stops,
consumers lose confidence and a nation's financial state begins to falter. Conversely, stocks rise,
confidence spreads, spending and investments grow. A nation’s mood can rise or fall on stock
market activity and performance, which shows how important the role played by a stock exchange
can be in a society’s social and fiscal fabric.
If one of the stock market’s roles is to bring together like -minded investors, exchanges also
serve as fiscal melti ng pots, giving minority businesses an opportunity to place shares of new
company assets before potential stakeholders who might not otherwise learn about diverse new
products were it not for the exchange. Few economies can hope to flourish without infusio ns of
new ideas, systems and opportunities -all represented by cash – which is why this confluence of
financial needs and wants regularly merges on the floor of a vibrant stock exchange.
A stock market can have an impact on the economy in three critical wa ys. Firstly, they
allow individual investors to own shares in a successful company. Without stocks, only large
private equity investors could profit from a free market economy. Secondly, stocks provide the

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capital for companies to grow large enough to gai n competitive advantage through economies of
scale. Owners using personal credit cards, bank loans, and eventually even floating their own bonds
can only take a company so far.
It is believed that over time, they will need to take the company public throug h an Initial
Public Offering (IPO). This results in a rapid increase of cash and signals that a company is
successful enough to afford the IPO process. The only drawback is that the founders no longer own
the company since it is sold to the stockholders. H owever, they can retain a controlling interest in
the company if they own 51% of the shares.
Thirdly, stocks give an instant and ongoing assessment of how valuable investors think the
company is. When stock prices rise, it means investors think earnings will improve. Falling stock
prices mean investors have lost confidence in the company's ability to increase its profit margins.
The stock market is an excellent economic indicator of a country’s economic health. Due to
the fact that stocks reflect how well a company is performing, a certain degree of transparency is
created. If investors are confi dent, they will buy stocks, stock mutual funds, or stock options. Some
experts believe markets are capable to predict by about six months what the savviest investors think
the economy will be doing. Stock prices usually rise in the expansion phase of the b usiness cycle.
The three main indices are the Dow Jones Averages, the S&P 500 and the NASDAQ.
The stock market also contributes to the nation's economy. That's because the financial
markets are very sophisticated. That's makes it easier to take a company p ublic than in other
countries. It also makes information on companies accessible and easy to obtain. This in result,
raises the trust of investors from around the world. As a result, for example the U.S. stock market
attracts the most investors in the wor ld. That makes it easy for U.S. companies to take their
companies public in an initial public offering. Since the stock market is a vote of confidence, a
devastating crash can hurt economic growth. Lower stock prices mean less wealth for businesses,
pensio n funds, and individual investors. That decreases business spending, since companies can't
get as much funding for expansion. When retirement fund values drop, it reduces consumer
spending. If stock prices stay depressed long enough, then new businesses ca n't get the funds
needed to grow. Companies that had invested their cash in stocks won't have enough to pay
employees, or fund pension plans. Older workers will find they don't have enough money to retire.
A stock market crash indicates a sudden and severe loss of confidence. An economic crisis
normally causes it. For instance, the Dow lost 700 points in the market crash of 2008. Investors

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were alarmed when the Senate failed to approve the bank bailout bill. The loss of confidence led to
the Great Recessio n.
But investing in the stock market is the best way to beat inflation over time. That's because,
on average, stock prices have increased 10% annually. That more than compensates most investors
for the additional risk2.
The idea that financial developmen t promotes economic growth dates back to the works of
Bagehot (1873) and Schumpeter (1912). Following their early arguments, the pioneering research
of Gurley and Shaw (1955), Goldsmith (1969), McKinnon (1973) and Shaw (1973) paved the way
for modeling the role of financial development in economic growth. More recently, extensive
empirical research has supported the hypothesis that well -functioning financial systems augment
economic growth (e.g., Levine and Zervos, 1998a, 1996; Rousseau and Wachtel, 2000)
In principal, stock markets are the center of the heart of financial systems. The primary
function of stock markets is to serve as a mechanism for transforming savings into financing for the
real sector. From a theoretical perspective, stock markets can acc elerate economic growth by
mobilizing and boosting domestic savings and improving the quantity and quality of investment.
Better savings mobilization may result in a rise of the rate of saving and if stock markets allocate
savings to investment projects yi elding higher returns, the increasing rate of return to savers will
make savings more appealing. Consequently, more savings will be channeled into the corporate
sector. Efficient stock markets make corporations compete on an equal basis for funds and help
make investment more efficient. Beyond this aspect of their role in the economy, stock markets
perform many other crucial functions. Stock markets can perform an “act of magic” by permitting
long-term investment to be financed by funds provided by individu als, many of whom wish to be
able to with draw them at will . In addition, stock markets can increase the efficiency of the financial
system through competition among different classes of financial instruments. This, in turn, can
augment the return on saving s for those who save, and can as well lower the cost of raising funds to
borrowers. Stock markets may also enhance accounting and tax standards as investors request more
and satisfactory information in order to compare different corporations’ performance. It logically
follows that, as a result, it would be in the corporation’s best interest to provide that information to
facilitate thorough comparisons between competing corporations. One outstanding benefit of the
existence of stock markets is the potential imposition of greater discipline in the area of economic

2 AMADEO, K; How the Stock Market Affects You, Even If You Don't Invest ; Retrieved on 14 April 2017, available
online at https://www.thebalance.com/how -do-stocks -and-stock -investing -affect -the-u-s-economy -3306179

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management: being sensitive to policy changes, particularly monetary policy, stock markets,
through their very existence,
help enhance policy creditability.
In light of the fact that empirical resea rch supports the premise that stock markets promote
economic growth, over the past decade research has shifted to the question of the determinants of
stock market development. Understanding both the dynamics and the determinants of the
development of stock markets is not only a critical element in understanding the relationship
between finance and economic growth, but also has important policy implications as it sheds light
on areas that need government action to make the economic and institutional environ ment
conducive to stock market development3. While the question of what determines stock market
development has gained considerable attention in the empirical research recently, with the
exception of the attempt of Calderon -Rossell (1991), theoretical rese arch on the issue is in the very
earliest stages. Reality is complex and the dynamics behind the development of stock markets are
hard to capture. Yet, it will be necessary for fruitful and well -focused future research to make use
of a framework for analyz ing those dynamics and to develop a financial theory of stock market
development.

1.2. Stock exchange transactions – terms and practicalities

The stock exchange is a focal institution in the capital market that marshals resources for
economic activities . It absorbs savings and provides liquidity for investments, helps reduce
investment risks, offers transparency for investments and encourages entrepreneurship. Economic
development requires commitment to long -term investment. The stock exchange provides l ong-
term capital for major sectors of the economy including businesses and the government. Stock
exchange indexes are often used as an indicator of economic health. Chart 1 below illustrates the
framework for the development of Stock Markets.

3 ODUGHEMI, S., LEE, T., eds. Accountability through public opinion: from inertia to public action . Washington:
The World Bank, 2011. ISBN 978 -0-8213 -8505 -0

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Figure 1: Framework for the Development of Stock Markets

Source: Retrieved from K. A. El -Wassal ”The Development of Stock Markets: In Search of a
Theory”; International Journal of Economics and Financial Issues, Vol. 3, No. 3, 2013,
pp.606 -624; ISSN: 2146 -4138; w ww.econjournals.com, page 9.

A stock exchange or bourse is an exchange where stock brokers and traders can purchase
and/or sell stocks (also called shares), bonds, and other securities. Stock exchanges may also
provide facilities for issue and redemption of securities and other financial instruments, and capital
events including the payment of income and dividends. Securities traded on a stock exchange
include stock issued by listed companies, unit trusts, derivatives, pooled investment products and
bonds. Stock exchanges often function as "continuous auction" markets, with buyers and sellers
consummating transactions at a central location, such as the floor of the exchange.
To be able to trade a security on a certain stock exchange, it firstly needs to be listed.
Usually, there is a central location at least for record keeping, but trade is increasingly less linked to
such a physical place, as modern markets use electronic networks, which gives them advantages of
increased speed and reduced cost of transact ions. Trade on an exchange is restricted to brokers who

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are members of the exchange4. In recent years, various other trading venues, such as electronic
communication networks, alternative trading systems and "dark pools" have taken much of the
trading acti vity away from traditional stock exchanges.
The initial public offering of stocks and bonds to investors is by definition done in the
primary market and subsequent trading is done in the secondary market. A stock exchange is often
the most vital component of a stock market. Supply and demand in stock markets are driven by
various factors that, as in all free markets, affect the price of stocks (see stock valuation). There is
usually no obligation for stock to be issued via the stock exchange itself, nor mus t stock be
subsequently traded on the exchange. Such trading may be off exchange or over -the-counter. This
is the most common way that derivatives and bonds are traded. Increasingly, stock exchanges are
part of a global securities market.
A stock exchange provides companies with the facility to raise capital for expansion
through selling shares to the investing public. Besides the borrowing capacity provided to an
individual or firm by the banking system, in the form of credit or a loan, there are four comm on
forms of capital raising used by companies and entrepreneurs. Most of these available options
might be achieved, directly or indirectly, through a stock exchange.
Capital intensive companies, particularly high tech companies, always need to raise high
volumes of capital in their early stages. For this reason, the public market provided by the stock
exchanges has been one of the most important funding sources for many capital intensive startups.
After the 1990s and early -2000s hi -tech listed companies' bo om and bust in the world's major stock
exchanges, it has been much more demanding for the high -tech entrepreneur to take his/her
company public, unless either the company already has products in the market and is generating
sales and earnings, or the compa ny has completed advanced promising clinical trials, earned
potentially profitable patents or conducted market research which demonstrated very positive
outcomes. This is quite different from the situation of the 1990s to early -2000s period, when a
number of companies (particularly Internet boom and biotechnology companies) went public in the
most prominent stock exchanges around the world, in the total absence of sales, earnings and any
well-documented promising outcome. In any manner, every year a number of companies, including
unknown highly speculative and financially unpredictable hi -tech startups, are listed for the first
time in all the major stock exchanges – there are even specialized entry markets for these kind of

4 K. A . EL-WASSAL ”The Development of Stock Markets: In Search of a Theory”; International Journal of
Economics and Financial Issues, Vol. 3, No. 3, 2013, pp.606 -624; ISSN: 2146 -4138;

13
companies or stock indexes tracki ng their performance (examples include the Alternext, CAC
Small, SDAX, TecDAX, or most of the third market good companies).
A number of companies have also raised significant amounts of capital through R&D
limited partnerships. Tax law changes that were en acted in 1987 in the United States changed the
tax deductibility of investments in R&D limited partnerships. In order for a partnership to be of
interest to investors today, the cash on cash return must be great enough to entice investors.
A third usual so urce of capital for startup companies has been venture capital. This source
remains largely available today, but the maximum statistical amount that the venture company
firms in aggregate will invest in any one company is not limitless (it was approximatel y $15 million
in 2001 for a biotechnology company).
A fourth possible source of cash for a private company is a corporate partner, usually an
established multinational company, which provides capital for the smaller company in return for
marketing rights, patent rights, or equity. Corporate partnerships have been used successfully in a
large number of cases.
When people draw their savings and invest in shares (through an IPO or the issuance of new
company shares of an already listed company), it usually lea ds to rational allocation of resources
because funds, which could have been consumed, or kept in idle deposits with banks, are mobilized
and redirected to help companies' management boards finance their organizations. This may
promote business activity wit h benefits for several economic sectors such as agriculture, commerce
and industry, resulting in stronger economic growth and higher productivity levels of firms.
Companies view acquisitions as an opportunity to expand product lines, increase
distribution channels, hedge against volatility, increase their market share, or acquire other
necessary business assets. A takeover bid or a merger agreement through the stock market is one of
the simplest and most common ways for a company to grow by acquisition or f usion.
Both casual and professional stock investors, as large as institutional investors or as small as
an ordinary middle -class family, through dividends and stock price increases that may result in
capital gains, share in the wealth of profitable busines ses. Unprofitable and troubled businesses
may result in capital losses for shareholders.
By having a wide and varied scope of owners, companies are generally inclined to improve
management standards and efficiency to satisfy the demands of these shareholde rs, and the more
stringent rules for public corporations imposed by public stock exchanges and the government.
Consequently, it is alleged that public companies (companies that are owned by shareholders who

14
are members of the general public and trade share s on public exchanges) tend to have better
management records than privately held companies (those companies where shares are not
publicly traded, often owned by the company founders and/or their families and heirs, or otherwise
by a small group of invest ors).
Despite this allegation, some well -documented cases are known where it is claimed that
there has been considerable slippage in corporate governance on the part of some public
companies. The dot -com bubble in the late 1990s, and the subprime mortgage crisis in 2007 –08, are
classical examples of corporate mismanagement. Companies like Pets.com (2000), Enron (2001),
One.Tel (2001), Sunbeam (2001), Webvan (2001), Adelphia (2002), MCI WorldCom (2002),
Parmalat (2003), American International Group (2008), B ear Stearns (2008), Lehman Brothers
(2008), General Motors (2009) and Satyam Computer Services (2009) are examples that contained
scrutiny by the media.
To assist in corporate governance many banks and companies worldwide utilize securities
identification numbers (USIN) to identify, uniquely, their stocks, bonds and other securities.
Adding an ISIN code helps to distinctly identify securities and the ISIN system is used worldwide
by funds, companies, and governments.
However, when poor financial, ethical or managerial records are apparent to the stock
investors, the stock and the company tend to lose value. In the stock exchanges, shareholders of
underperforming firms are often penalized by significant share price decline, and they tend as well
to dismiss in competent management teams.
As opposed to other businesses that require huge capital outlay, investing in shares is open
to both the large and small stock investors because a person buys the number of shares they can
afford. Therefore, the Stock Exchange p rovides the opportunity for small investors to own shares of
the same companies as large investors.
Governments at various levels may decide to lend money to finance infrastructure projects
such as sewage and water treatment works or housing estates by sel ling another class of securities
known as bonds. These bonds can be raised through the stock exchange whereby members of the
public buy them, thus loaning money to the government. The issuance of such bonds can obviate,
in the short term, direct taxation o f citizens to finance development —though by securing such
bonds with the full faith and credit of the government instead of with collateral, the government
must eventually tax citizens or otherwise raise additional funds to make any regular coupon
payments and refund the principal when the bonds mature.

15
At the stock exchange, share prices rise and fall predominantly depend on economic forces.
Share prices tend to rise or remain stable when companies and the economy in general show signs
of stability and gr owth. An economic recession, depression, or financial crisis could eventually lead
to a stock market crash. Therefore, the movement of share prices and in general of the stock
indexes can be an indicator of the general trend in the economy.
Listing require ments are the set of conditions imposed by a given stock exchange upon
companies that want to be listed on that exchange. Such conditions sometimes include minimum
number of shares outstanding, minimum market capitalization, and minimum annual income.
Requirements by stock exchange:
Companies must adhere to the exchange's requirements to have their stocks and shares
listed and traded there, but requirements vary by stock exchange:

● New York Stock Exchange: To be listed on the New York Stock Exchange (NY SE),
a company must have issued at least a million shares of stock worth $100 million
and must have earned more than $10 million over the last three years.
● NASDAQ Stock Exchange: To be listed on the NASDAQ a company must have
issued at least 1.25 million s hares of stock worth at least $70 million and must have
earned more than $11 million over the last three years.
● London Stock Exchange: The main market of the London Stock Exchange has
requirements for a minimum market capitalization (£700,000), three years of audited
financial statements, minimum public float (25 %) and sufficient working capital for
at least 12 months from the date of listing.

Taking this into account to the discussion of the practicalities involved in the stock
exchange transaction, it is vital to point out that at any stage of development, various sectors of the
economy need long -term capital to grow. For example, the business sector needs capital to invest in
new production facilities or revamping existing plants. Correspondingly, gove rnments need funds
for infrastructure investments. These types of investments require long -term capital commitment
and are provided by a properly functioning stock exchange.
Without the existence of a liquid stock exchange, investors are reluctant to tie u p their
money in long -term investments. A liquid stock exchange helped the industrial revolution; without
it savers would have been reluctant to commit to long -term projects that were required in the early

16
phase of the industrial revolution. Liquidity give s the investors in publicly -traded shares the
assurance that they can sell their shares whenever they want to exit their investments. At the same
time, investors in privately -held shares need to wait until their investments generate returns.
A properly fun ctioning stock exchange stimulates investment and aids to create value for
investors. To make effective decisions, investors require reliable information about investment
opportunities and their quality. A functioning stock exchange generates and dissemina tes
information about publicly -traded companies. Stock prices reflect the company's performance and
obtainable information. Additionally, long -term investments require investors to relinquish direct
control over their money. In this situation, investors ne ed guarantees that the managers of the
investments sincerely work to create value for investors. A developed stock exchange helps this in
two aspects. Firstly, compensating managers based on stock performance or in company shares
aligns the interests of ma nagers with investors. Secondly, in a liquid stock exchange, the
opportunity for others to take over a company gives the management an incentive to maximize
value for investors. In other words, other agents will take over the enterprise and turn it around for
better value creation if the managers do not perform well.
A liquid stock exchange provides a chance for investors to diversify their financial
investments across different economic activities and spread their risks. Additionally, they have
limited lia bility in their investments and have no obligations to continue investing in failing
ventures. Existence of risk reduction mechanisms can spur more investments. Financiers of start -up
companies can transform their privately -held shares into tradable securi ties through the normal
framework of a stock exchange5. This helps them exit and liquidate their investments in previous
ventures and reinvest in new opportunities. The existence of an exit mechanism encourages
investment in a venture at an early stage.
The relationship between stock prices and real economic activity is circular. On the one
hand, stock prices depend on a company’s performance and its growth prospects so that to the
degree that a company’s performance improves and the rate of return increase s, stock prices rise in
turn. On the contrary, stock prices should reflect the present discounted value of expected future
dividends or expected future growth. From this perspective, stock prices serve as a leading
indicator of future changes in real econo mic activity. Generally, there are three main channels

5 LEAF GROUP; The Impact of the Stock Exchange Market in Economic Development ; Finance – Zacks. Zacks,
published on 07 Feb. 2017. Accessed on 4 May 2017; available online at http://finance.zacks.com/impact -stock –
exchange -market -economic -development -8358.html

17
whereby stock prices can affect real economic activity: i) the wealth effect: under the life
cycle/permanent income, higher stock prices and increased wealth in stocks lead investors to
increase their consumption. This increase in consumption will be more significant in countries
where the stock ownership base is large; ii) cost of capital: with stock prices increasing, the cost of
new capital relative to existing capital decreases, more companies go pu blic and raise funds for
investment through public offerings. In addition, an adequate performance on the stock market
might attract foreign capital, which would allow interest rates to go down (if other things are
unchanged); and iii) the confidence effec t/expectation effect: a highly performing stock market
might improve overall expectations, which might induce economic growth through more
investment as part of a positive feedback effect. Moreover, stock prices signal faster growth of
companies and as a r esult a possible growth of future real individuals’ income might also induce
more consumption (Morck et al, 1990). Although these factors/channels are hard to quantify, it is
important to accurately assess the strength of the link between stock markets and real economic
activity.

1.3. Legal and institutional framework on stock market transactions in the European Union

European law on stock exchanges and other securities markets is directed towards widening
the range of investments at European level while protecting investors. The conditions for the
admission of securities to official stock exchange listing are coordinated and the single market in
securities is a reality [Directive 2001/34]. The financial crisis [see section 6.6.1] has exposed,
among other things, the need to strengthen the framework for the regulation of markets in financial
instruments, including where trading in such markets takes place over -the-counter (OTC), in order
to increase transparency, appropriate protection for investors, reinfo rcement of confidence,
addressing of unregulated areas, and assurance that supervisors are granted adequate powers to
fulfil their tasks. Therefore, Regulation 600/2014 and Directive 2014/65, were adopted to form a
coherent legal framework governing the re quirements applicable to investment firms, regulated
markets, data reporting services providers and third country firms providing investment services or
activities in the Union.
In order to abolish the remaining obstacles to trade and significant distortio ns of
competition resulting from divergences between national laws, provisions in respect of trade and
regulatory transparency requirements take the form of a Regulation directly applicable to all

18
investment firms that should follow uniform rules in all Un ion markets [Regulation 600/2014, last
amended by Regulation 600/2014]. This Regulation establishes uniform requirements in relation to
the following: disclosure of trade data to the public; reporting of transactions to the competent
authorities; trading o f derivatives on organised venues; non -discriminatory access to clearing and
non-discriminatory access to trading in benchmarks; product intervention powers of competent
authorities; and provision of investment services or activities by third -country firms .
Directive 2014/65 accommodates the provisions governing the authorisation of the business
of investment firms, the acquisition of qualifying holding, the exercise of the freedom of
establishment and of the freedom to provide services, the operating condi tions for investment firms
to ensure investor protection, the powers of supervisory authorities of home and host Member
States and the regime for imposing sanctions. The form of a Directive was chosen in order to
enable the implementing provisions, when ne cessary, to be adjusted to any existing specificities of
the particular market and legal system in each Member State.
The equity capital of investment firms and credit institutions must be sufficient to safeguard
market stability, guarantee an identical le vel of protection in respect of bankruptcy to investors
throughout the European Union and to ensure fair competition between banks, which are subject to
specific prudential provisions, and investment societies on the securities market. In order to fulfil
these objectives, a Directive lays down minimum initial capital requirements and sets the equity
capital, which must permanently be held in order to cover position, settlement, exchange and
interest rate risks [Directive 2006/49]. All Member States must pro vide for minimum compensation
for investors in the event of the failure of an investment firm, authorised to provide services
throughout the Union [Directive 97/9]. In cases of insolvency, the collateral security provided in
connection with participation i n payment and securities settlement systems must be realised most
importantly in order to satisfy the rights of these systems vis -à-vis the insolvent party [Directive
98/26]. The directive setting up common rules for collateral pledged to payment and secur ities
settlement systems aims to limit credit risk and improve the functioning and stability of the
European financial markets [Directive 2002/47, last amended by Regulation 2016/1675]. In order
to ensure a high level of investor protection, a directive la ys down the rules for the authorisation,
ongoing operation and transparency of the managers of alternative investment funds (AIFMs) in the
Union [Directive 2011/61, last amended by Directive 2014/65].
Closely linked to AIFMS European long -term investment f unds (ELTIFs) provide finance of
lasting duration to various infrastructure projects, unlisted companies, or listed small and medium –

19
sized enterprises (SMEs) that issue equity or debt instruments for which there is no readily
identifiable buyer [Regulation 2015/760]. Long -term finance is a crucial enabling tool for putting
the European economy on a path of smart, sustainable and inclusive growth, in accordance with the
Europe 2020 strategy, high employment, and competitiveness for building tomorrow's econom y in
a way that is less prone to systemic risks and is more resilient. On the demand side, ELTIFs can
provide a steady income stream for pension administrators, insurance companies, foundations,
municipalities and other entities that face regular and recur rent liabilities and are seeking long -term
returns within well -regulated structures.
Due to their key position in the settlement process, the securities settlement systems
operated by central securities depositories (CSDs) are of great significance for the functioning of
securities markets. Having a substantial part in the securities holding systems through which their
participants report the securities holdings of investors, the securities settlement systems operated by
CSDs also serve as an essential tool to control the integrity of an issue, hindering the undue
creation or reduction of issued securities, and thereby play an important role in maintaining
investor confidence. Therefore, a Regulation consist of uniform requirements for the settlement of
financial instruments in the Union and rules on the organisation and conduct of CSDs to boost safe,
efficient and smooth settlement, which is of a systemic importance for the functioning of securities
markets [Regulation 909/2014].
In order to combat fraudulen t use of privileged stock exchange information, ensure the
integrity of European financial markets and enhance investor confidence in those markets a
Regulation establishes a common regulatory framework on insider dealing, the unlawful disclosure
of inside information and market manipulation (market abuse regulation) [Regulation 596/2014,
last amended by Regulation 2016/1011]. Member States must prohibit any person who possesses
inside information (as defined in the Regulation) from using that information b y acquiring or
disposing of for his own account or for the account of a third party, either directly or indirectly,
financial instruments to which that information relates. "Market manipulation" means notably
transactions or dissemination of information, w hich give false or misleading signals as to the
supply of, demand for or price of financial instruments or which employ fictitious devices or any
other form of deception or contrivance. Taking into account the legal framework established by
Regulation 596/ 2014 and its implementing measures, a Directive establishes 8a set of rules for
criminal sanctions for insider dealing, for unlawful disclosure of inside information and for market

20
manipulation to ensure the integrity of financial markets in the Union and to enhance investor
protection and confidence in those markets (market abuse directive) [Directive 2014/57].
Credit rating agencies perform a duty in global securities and banking markets, as their
credit ratings are used by investors, borrowers, issuers and governments as part of making informed
investment and financing decisions. Currently, most credit rating agencies have their headquarters
outside the European Union and are subject to European law only in limited areas. These agencies
are considered to have failed, first, to reflect early enough in their credit ratings the worsening
market conditions in 2008, and second, to adjust their credit ratings in time following the deepening
market crisis. As a response to the world financial crisis, a 2009 Regu lation introduced a common
regulatory approach in order to enhance the integrity, transparency, responsibility, effective
governance and reliability of credit rating activities, contributing to the quality of credit ratings
issued in the European Union, th ereby contributing to the smooth functioning of the internal market
while achieving a high level of consumer and investor protection [Regulation 1060/2009, last
amended by Directive 2014/51]. Three Commission Regulations fix the regulatory technical
standa rds: (a) for the periodic reporting on fees charged by credit rating agencies for the purpose of
ongoing supervision by the European Securities and Markets Authority (ESMA) [Regulation
2015/1, see section 7.3]; (b) for the presentation of the information t hat credit rating agencies make
available to ESMA [Regulation 2015/2]; and (c) on disclosure requirements for structured finance
instruments [Regulation 2015/3].
The arrangement of the conditions for the admission of securities to official listing on stock
exchanges situated or operating in the Member States is aimed at providing uniform guarantees to
investors in the various Member States [Directive 2001/34]. It facilitates both the admission to
official stock exchange listing, in each such State, of secur ities from other Member States and the
listing of any given security on a number of stock exchanges in the EU. It may accordingly make
for greater interpenetration of national securities markets by removing those obstacles that may
prudently be removed and therefore contribute to the prospect of establishing a European capital
market. The "single passport" for issuers ensures compatibility of the requirements for the drawing
up, approval and distribution of the prospectus to be published when securities are offered to the
public or admitted to trading [Directive 2003/71, last amended by Regulation 2016/301. It seeks the
assurance that adequate and equivalent disclosure standards are in place in all Member States, so as
to afford investors throughout the Euro pean Union a uniform degree of protection. Minimum
guidelines and common principles are established for the conduct of takeover bids (OPA) for the

21
securities of companies governed by the laws of Member States, where all or some of those
securities are admi tted to trading on a regulated market [Directive 2004/25, last amended by
Regulation 2016/1675]. A Directive establishes requirements in relation to the disclosure of
periodic and ongoing information about issuers whose securities are already admitted to trading on
a regulated market situated or operating within a Member State [Directive 2004/109, last amended
by Directive 2013/50].
A central factor for the proper functioning of the internal market in transferable securities is
the Directive relating to un dertakings for collective investment in transferable securities (UCITS)
[Directive 2009/65, last amended by Directive 2014/91]. It coordinates the rules governing such
undertakings in the Member States with the viewpoint, on the one hand, to approximating the
investment policies and the conditions of competition between these UCITS at European level and,
on the other hand, to ensuring effective and more uniform protection of shareholders in such
undertakings. This coordination allows a "European passport" r egime, whereby financial
undertakings authorized to offer services in one Member State may offer their services throughout
the internal market without additional authorization6.
In the same regard, another significant aspect of EU regulation with impact on stock market
is the markets in financial instruments directive (MiFID), which is a regulation that increases the
transparency across the European Union's financial markets and standardizes the regulatory
disclosures required for particular markets. The M iFID implemented new measures, such as pre –
and post -trade transparency requirements, and set out the conduct standards for financial firms. The
directive has been in force across the European Union (EU) since 2008. MiFID has a defined scope
that primarily focuses on over the counter (OTC) transactions.
The stated aim of the MiFID is for all EU members to share a common, robust regulatory
framework that protects investors. MiFID came into effect prior to the 2008 financial crisis, but
changes were made in l ight of the crisis. One of the issues in the original drafts is that the
regulatory approach to third country firms was left up to each member state, and that led to some
firms outside the EU having a competitive advantage as far as easier regulatory overs ight compared
to firms inside the EU. This issue is being addressed through MiFID II, which will harmonize the
rules for all firms with EU clients. The Markets in Financial Instruments Regulation (MiFIR) works

6 EUROPEDIA MOUSSIS EU; Europedia – Banking Services in the EU ; published on February 2017; accessed online
on 25 April 2017; available at
http://www.europedia.moussis.eu/books/Book_2/3/6/06/1/index.tkl?lang=en&all=1&pos=75&s=1&e=10

22
in conjunction with MiFID and MiFID II to exte nd the codes of conduct beyond shares to other
types of assets, including contract based assets and structured finance products.
MiFID is merely one component of the regulatory changes sweeping the EU and impacting
the compliance departments of all the fin ancial firms – insurers, mutual fund providers, banks, etc. –
operating there. Taken together with other regulatory initiatives like the General Data Protection
Regulation (GDPR) and Markets in Financial Instruments Regulation (MiFIR), the EU is following
through on its vision of a transparent market with clear rights and protections for EU citizens. As
with any regulatory framework, many of the rules are tweaks upon existing regulations, such as the
requirements for disclosure where a conflict of interest exists. However, several best practices, like
the appointment of a single officer responsible for protecting client interests from within the firm,
are now explicit requirements for firms wanting to access the EU market.
In other context, the EU has adopte d a new Market Abuse Regulation (MAR) that will take
effect from July 3, 2016 and will differentiate in certain material respects from U.S. regulation.
MAR applies to companies with securities admitted to trading in the EU, and therefore has
implications f or U.S. issuers that have debt and equity securities admitted to trading in the EU,
including Eurobonds that have been admitted to trading on previously unregulated exchanges such
as the Dublin and Luxembourg exchanges. The following memorandum explains th is regime for
U.S. issuers. After many years where non -U.S. issuers have complained about extra -territorial
imposition of rules by U.S. regulators, some U.S. companies will now face a similar situation and
will be subject to additional rules imposed by EU regulators despite relatively little nexus to EU
securities markets.
Market Abuse Regulation (MAR) implemented a new standardized pan -EU regime dealing
with market abuse, market manipulation and insider dealing. It entails rules in regards to, inter alia,
the disclosure of inside information, the maintenance of insider lists and dealings in securities by
persons discharging managerial responsibility (PDMRs) with the intention to enhance market
integrity and investor protection. MAR will have direct applicat ion in the EU Member States from
July 3, 2016, replacing both the existing Market Abuse Directive (MAD) and related implementing
national legislation.
MAR applies to issuers with financial instruments admitted to trading (or for which a
request for admission has been made) on an EU regulated market such as the London Stock
Exchange. For the first time, the EU market abuse regime will also be extended to issuers with
financial instruments, such as debt securities, admitted to trading (or for which a request for

23
admission has been made) on a multilateral trading facility (MTF). Examples of MTFs include
Luxembourg’s Euro MTF and Ireland’s Global Exchange Mar ket (GEM Market), where many U.S.
issuers have listed their euro – denominated debt, and which were previously unregulated and not
subject to the EU market abuse regime. In addition, MAR will apply to financial instruments traded
on an organized trading fac ility (OTF) when that category is introduced as part of the revisions to
the Markets in Financial Instruments Directive (MiFID) in 2018. MAR will also apply to
derivative instruments whose price or value depends on or has an effect on the price of a finan cial
instrument referred to above.
All U.S. issuers with securities admitted to trading on an EU trading venue should evaluate
how MAR may affect them. A U.S. issuer with financial instruments admitted to trading on an EU
regulated market is already subject to the existing EU market abuse regime. If such an issuer also
has financial instruments admitted to trading on an MTF, these will now fall within the scope of the
regime as well. Thus, the requirements under MAR will be incremental to those with w hich such an
issuer currently complies, taking the form of more granular record -keeping and disclosure
obligations, which are described below and at Annex II of the complete publication.
Where a U.S. issuer’s financial instruments are only traded in the EU on an MTF rather than
a regulated market, there will be a more material increase in the regulatory burden compared with
the present position. However, some of the procedures the issuer operates to allow it to comply
with its U.S. regulatory requirements m ay assist the issuer in dealing with that burden effectively,
although MAR will impose additional requirements.
Where a U.S. issuer’s financial instruments are acknowledged to trading in the EU only on
an MTF and the issuer has not approved or consented to such admission to trading, the offences of
insider dealing, unlawful disclosure and market manipulation will apply to those trading in those
instruments regardless of whether an issuer approved of its instruments being admitted to trading
and/or knew they were traded on an EU trading venue. However, the issuer obligations in MAR
(i.e. disclosure of inside information, control of inside information and insider lists and dealings by
PDMRs) will apply only to issuers who have approved admission to trading of their securities on at
least one EU trading venue. MAR introduces a number of key obligations, further described at
Annex II of the complete publication, including certain aspects.
Firstly, it concerns the disclosure of inside information. An issuer with securities admitted
to trading on an EU regulated market is currently under a duty to disclose inside information to the
market as soon as possible, except where it is in the issuer’s legitimate interests for disclosure to be

24
delayed. This obligation is re tained under MAR but will now be enlarged to a wider scale of trading
venues. The legislation also contains a new requirement for an issuer to inform the national
regulator of the trading venue of any such delay and issuers must also retain a record of how they
determined that the delay in disclosure was in their legitimate interests. In addition, MAR provides
that, once disclosed, inside information must be accessible to the public on the issuer’s website for
five years.
Second, it enforces the control of inside information and insider lists. MAR also requires the
issuer to maintain insider lists in a prescribed format, and it introduces a new and detailed regime
for wall -crossings, known as “market soundings” in MAR. Where sounding -out investors involves
disclosure of inside information, the issuer can benefit from a “safe harbor” in relation to the
unlawful disclosure offence where it follows a specific market sounding procedure and maintains
certain records. In particular, the issuer must, inter alia: (i ) determine whether information disclosed
is inside information and keep written records of that determination; (ii) keep records in relation to
the disclosure of the information; (iii) inform the recipient as soon as possible once the information
ceases t o be inside information; (iv) keep records of the disclosure process for five years; and (v)
inform the market participant that, by agreeing to receive the information, he is obliged to keep the
information confidential.
Dealings by PDMRs. MAR requires PDM Rs as well as persons closely associated with
them to impart to the issuer and the national regulator certain notifiable transactions in the issuer’s
financial instruments. The issuer must ensure that any such notification is also disclosed to the
market. Although the PDMR notification regime is a feature of the existing MAD regime
applicable to regulated markets, MAR introduces significant changes, such as the introduction of a
de minimis threshold for notification of transactions in an issuer’s financial instruments of €5,000
annually (or such higher threshold of up to €20,000 as may be set by a Member State). MAR has
also reduced the time limit for notifications to three business days (from four business days under
the existing MAD regime). In addition, M AR generally bans PDMRs from dealing when in
possession of inside information or when in a “closed period,” i.e. thirty days before an
announcement of interim or annual results. Trading under 10b5 -1 programs will be subject to these
restrictions in relatio n to the financial instruments traded on an EU trading venue, but not in
relation to those instruments traded only on a U.S. trading venue.
Effect on trading of the instruments. As Annex I of the complete publication explicitly
states that, MAR will not ap ply to the trading of U.S. listed securities by U.S. counterparties where

25
there is no EU nexus, i.e. where the relevant financial instruments of the issuer are not admitted to
trading on an EU regulated market, MTF or OTF. However, given the expansion of t he regime to
cover MTFs and OTFs, it may be difficult for market participants to determine whether or not a
particular instrument is in scope (for example, whether a U.S. listed security has also been admitted
to trading on an EU trading venue by a third p arty without the consent of the issuer) and, therefore,
whether the offences of insider dealing, unlawful disclosure and market manipulation will apply to
those trading in those instruments.
MAR requires the European Securities and Markets Authority (ESMA) to maintain a list of
MAR -scope financial instruments based on information received from national regulators,
themselves having received the information from market operators. However, the obligation to
maintain this list will not apply until January 2018 , and this list will not be definitive under MAR
and may not be updated frequently enough. Market participants may wish to establish systems to
monitor this list and/or create monitoring systems that establish whether certain debt or equity
instruments are in scope.
Issuers that were not previously subject to the EU market abuse regime will need to adopt
internal policies, procedures and controls to meet the requirements of MAR as they apply to that
issuer’s affected securities, i.e. those securities that a re traded on an EU trading venue. These
issuers must also safeguard that their boards, PDMRs and other relevant staff receive training on
the regime and their obligations, which will apply in respect of securities admitted to trading on an
EU trading venue . In addition, they must prepare insider lists in accordance with the relevant
ESMA format, as well as a list of PDMRs and their closely associated persons.
Issuers with financial instruments admitted to trading on an MTF that are already subject to
the EU market abuse regime as a result of also having financial instruments admitted to trading on
an EU regulated market will need to review and revise their internal policies, procedures and
controls to adhere to the requirements of MAR described above and ext end them to cover securities
admitted to trading on an MTF. The table in Annex II of the complete publication summarizes the
key points for issuers and includes references to those supplementary rules that have been
published in final draft form or have al ready entered into force. Issuers will need to continue to
review the supplementary rules and guidance as they come into force over the coming weeks and
months.
Issuers may wish to contemplate de -listing from exchanges where the increased compliance
burden has become too burdensome and they wish to be removed from the scope of MAR. Issuers

26
should be attentive when checking the provisions of the securities themselves in order to establish
whether note holders have to be consulted about de -listing. There may also be a provision in the
original underwriting agreement obliging them to consult with the lead managers or seek an
alternative listing.
The rules of the relevant exchange will have to be taken into account when de -listing and
each individual MTF will h ave its own requirements. The Irish GEM Market has a relatively
straightforward de -listing process. An announcement must be released on the Irish Stock Exchange
giving notice that the issuer has applied for the securities to be delisted. Once the announcem ent is
released the Irish Stock Exchange will de -list the securities. In Luxembourg, a request specifying
the reasons for the request must be addressed to the Luxembourg Stock Exchange. In reviewing the
request, the Luxembourg Stock Exchange is required to take into account the interests of the stock
market, the investors and, if applicable, the issuer. The Luxembourg Stock Exchange will then fix
the date on which the de -listing of the securities will take effect. Other exchanges may take
alternative approa ches. As a result of the variation in practice, it is recommended that, where
issuers are considering de -listing their securities, they take specific local advice at the earliest
possible opportunity.

27
CHAPTER II STOCK MARKET ANALYSIS : ITS IMPACT ON THE TRANSACTIONS
VOLUME

From a company’s perspective, there are two characteristics that make equity capital
different from other forms of capital that may be used by companies. First, providers of equity
capital (the shareholders) are not guaranteed any fixed interest rate or any given rate of return on
the money they invest. Second, once the equity capital is provided to the company, shareholders
cannot withdraw their individual stakes. These two characteristics mean that equity capital is
crucial to, and particularly well suited for, long -term corporate investments that have an uncertain
outcome, such as research, innovation and the development of new technologies.
There are a number of different sources of equity cap ital, including the founder’s initial
equity capital and the company’s retained earnings, which are re -invested in the business rather
than taken out in the form of dividends. Additionally, a company may also raise equity in the
capital market – as a matte r of fact, since 2000, companies around the world have used public stock
markets to raise a total of USD 11 trillion in equity, which has led to profound structural changes in
the stock exchange trade. In fact, most traditional stock exchanges have either been acquired by
another entity or became subsidiaries of an upstream parent company. In the last case, the ultimate
parent company of an exchange may in turn be a public company with its shares listed and traded
on one or more of its own stock exchanges. Thus, as part of this transformation, many of the
national stock exchanges today form part of an international group structure.
At the same time, public equity markets have also been characterized by fragmentation
along two lines. First, there has been a f ragmentation of trading between stock exchanges (on –
exchange trading) and other trading venues (off -exchange trading). Second, there has been a
fragmentation between lit (displayed) and dark (non -displayed) trading. Among the driving forces
behind these fr agmentation trends are the advancements in the information and communication
technology, supported by regulatory reforms aiming to promote competition between different
trading venues.
In advanced economies, stock exchanges were traditionally established as member owned
organizations or government institutions. However, as mentioned above, since the mid -1990s – most
stock exchanges have been transformed into privately owned for -profit corporations. Today, all
major stock exchange operators in advanced econo mies have their shares listed and traded on their
exchanges, while the mutual form based on brokers’ membership has nearly disappeared. With

28
regard to emerging markets, stock exchanges were often established in the form of state -owned
corporations and, in general, their transformation into listed corporations has been more gradual.
For instance, while the stock exchanges in Brazil and Mexico are now listed companies, those in
Turkey and Saudi Arabia are still run as state -owned enterprises. Furthermore, the largest emerging
market stock exchanges, which are located in the People’s Republic of China, operate as semi –
public institutions, which are directly governed by the China Securities Regulatory Commission
(CSRC).
The following subchapter will present an analysis of the stock market transactions in the
European Union including its theoretical, statistical and practical implications.

2.1. Statistical analysis of the stock market transactions in the European Union for the period
1990 -2017
It is crucial to define the main terms and to formulate the key concepts around which new
ideas could arise, based upon the statistical analysis of this paper.
Thus, it is important to highlight that the listed shares (also referred to as quoted shares)
include all shares with prices listed on a recognized stock exchange or other form of regulated
market. Listed shares comprise financial assets, which represent property rights in corporations or
quasi -corporations. These financial assets generally entitle the holder to a sh are in the profits of the
corporations or quasi -corporations and to a share in their net assets in the event of liquidation.
Listed shares are valued and reported at market values.
The euro area securities issues statistics for listed shares, providing a s ectoral breakdown of
issuers of listed shares. The sectoral breakdown for listed shares is in line with the European
System of accounts (ESA) 2010, whenever possible and appropriate, and distinguishes primarily
between three types of issuer:

● MFIs (includi ng the Eurosystem) denotes the ECB and the national central banks of the
euro area and other monetary financial institutions;
● Non-monetary financial corporations denotes other financial intermediaries, financial
auxiliaries, captive financial institutions, insurance corporations and pension funds;
● Non-financial corporations;

29
Figure 2: Outstanding amounts of listed shares for issues by euro area residents broken down
by sector (EUR billions; market values)

Source: retrieved on April 20, 2017 from
https://www.ecb.europa.eu/stats/financial_markets_and_interest_rates/securities_issues/listed_shares/html/index.en.ht
ml.

From the chart above (Figure 2) one can observe the constant positive tendency concerning the
amounts of outstanding shares for issues , in billions of Euros, in the three main sectors analyzed by
the European Central Bank in April 2017: monetary financial institutions (MFIs); Financial
corporations other than MFIs and Non -financial corporations. The positive trend observed is due to
certain structural changes in the stock exchange industry. Some of those reasons include mergers
and acquisitions as well as the changes in the aggregate revenue structure of major stock
exchanges. Another reason which impacts the overall result observed is th e fragmentation of the
stock market resulting from an increase in stock exchange -like trading venues , – such as alternative
trading systems (ATSs) and multilateral trading facilities (MTFs) -, and a split between dark (non –
displayed) and lit (displayed) tr ading. Based on country -level and firm level data, Annex 1 provides
statistics for the relative distribution of stock trading across different trading venues as well as for
different trading characteristics, such as order size, company focus and the total volume(s) of dark
and lit trading. In Figure 3 below, one can observe the evolution of the market capitalization of
listed domestic companies as percentage of their Gross Domestic Product (GDP):

30
Figure 3: Market capitalization of listed domestic companies (% of GDP), 1975 -20

Source: retrieved on 20 April, 2017 from http://data.worldbank.org/indicator/CM.MKT.LCAP.GD.ZS

The historical evolution of market capitalization, which could be observed in Figure 3,
demonstrates that, according to the 1975 -2015 data gathered, the overall world market
capitalization was affected considerably by the seasonal shocks or financial crisis like the one in
2008. Still, the total number of stock traded reverted back from the dropdown caused by the
financial crisis and is reaching an historical record figure. This is also demonstrated in Figure 4,
below:

Figure 4: Stocks traded, total value (% of GDP)

Source: retrieved on 22 April, 2017 from http://data.worldbank.org/indicator/CM.MKT.LCAP.GD.ZS

31
Annex 1A and 1B provides a more detailed overview of the discussed indicators and figures in
Europe. It emphasizes certain indicators, such as market liquidity, which is defined as follows: the
value of s hares traded results from the total number of shares traded, both domestic and foreign,
multiplied by their respective matching prices. The value of shares traded represents the transfer of
ownership effected automatically through the exchange's electronic order book (EOB), where
orders placed by trading members are usually exposed to all market users and automatically
matched according to precise rules set up by the exchange, generally on a price/time priority basis.
Concerning data prior to 2001, the WFE used two different approaches for the collection of trading
data, depending on the individual stock exchange's market organization and rules. The first
approach is the Trading System View (TSV), in which stock exchanges count only those
transactions that p ass through their trading system or trading floor. The TSV is generally adopted
by exchanges that operate a centralized order book (order -driven market) and, in which trades done
by their members off the exchange are not included. The second approach is th e Regulated
Environment View (REV). Stock exchanges in this category include all transactions subject to
supervision by the market authority, including transactions made by members, and sometimes non –
members, on outside trading systems and transactions int o foreign markets. Taken the above into
consideration, it is relevant to add that figures reported under the REV approach will be higher than
those reported under the TSV approach.
In the same regard, it is worth mentioning that stock market size can be m easured in various
ways, and each may produce a different ranking of countries. Moreover, the development of an
economy's financial markets is closely related to its overall development. Well -functioning
financial systems provide good and easily accessible information, which can lower transaction
costs and subsequently improve resource allocation and boost economic growth. Both banking
systems and stock markets enhance growth, this being the main factor in poverty reduction. At low
levels of economic develo pment, commercial banks tend to dominate the financial system, while
instead, at higher levels of economic development, domestic stock markets tend to become more
active and efficient when compared to domestic commercial banks. Open economies with sound
macroeconomic policies, good legal systems, and shareholder protection attract capital and,
therefore, have larger financial markets. Recent research on stock market development shows that
modern communications technology and increased financial integration have resulted in more
cross -border capital flows, a stronger presence of financial firms around the world, and the
migration of stock exchange activities to international exchanges. Many firms in emerging markets

32
now cross -list on international exchanges, which provides them with lower cost capital and more
liquidity -traded shares. However, this also means that exchanges in emerging markets may not
have enough financial activity to sustain them, putting pressure on them to rethink their operations.
Turnove r ratio is the value of domestic shares traded, divided by their market capitalization.
This value is then annualized by multiplying the monthly average by 12. The statistical concept is
that the turnover ratio is the value of electronic order book (EOB) d omestic shares traded, divided
by their market capitalization7. This value is annualized by multiplying the monthly average by 12,
according to the following formula: (Monthly EOB domestic shares traded / Month -end domestic
market capitalization) x 12.
Another discussed indicator, also outlined in the Charts above, is the indicator of Listed
domestic companies. This one including foreign companies which are exclusively listed, those that
have shares listed on an exchange at the end of the year. Hence, in vestment funds, unit trusts, and
companies whose only business goal is to hold shares of other listed companies, such as holding
companies and investment companies, regardless of their legal status, are excluded. A company
with several classes of shares is counted once. Only companies admitted to listing on the exchange
are included. Statistically, a company is considered domestic when it is incorporated in the same
country and/or location as the exchange, the only exception being the case of foreign compa nies
which are exclusively listed on an exchange (i.e.: the foreign company is not listed on any other
exchange, as defined per the domestic market capitalization).
The last indicator covered in Annex 1 (A&B) is the S&P Global Equity Indices, which
measu res the U.S. dollar price change in the stock markets covered by the S&P/IFCI and
S&P/Frontier BMI country indices. The methodology consists of ratios of end -of-period levels in
U.S. dollars over previous end -of-period values in U.S. dollars times 100. The se indexes are widely
used benchmarks for international portfolio management. There are certain limitation as well,
which in this case are manifested by the percentage change in stock market prices in U.S. dollars
for developing economies is from Standard & Poor's Global Equity Indices (S&P IFCI) and
Standard & Poor's Frontier Broad Market Index (BMI). The percentage change for France,
Germany, Japan, the United Kingdom, and the United States is from local stock market prices. The
indicator is an important measure of overall performance. Regulatory and institutional factors that
can affect investor confidence, such as entry and exit restrictions, the existence of a securities and

7 Stock Trader ; Volume and its Meaning ; published on January 2016. Retrieved from
https://www .stocktrader.com/2006/03/21/volume -and-its-meaning/ ; ac cessed online on 26 April 2017.

33
exchange commission, and the quality of laws to protect investors, may influenc e the functioning of
stock markets. Because markets included in Standard & Poor's emerging markets category vary
widely in level of development, it is best to look at the entire category to identify the most
significant market trends. And it is useful to r emember that stock market trends may be distorted by
currency conversions, especially when a currency has registered a significant devaluation.
Coming back to the introductory paragraph of this chapter and the ongoing transformation,
there have been a larg e number of mergers and acquisitions (M&A) in the stock exchange industry,
involving companies from sectors such as electronic trading platforms, financial information
providers, financial index providers, data management and asset management. Chart 5 show s the
number of M&A transactions in the stock exchange industry between 2000 and 2014. The figure
covers a total of 169 buy -side deals and mergers involving publicly listed stock exchange operators.
In 26 of these transactions, a stock exchange acquired an equity stake in another stock exchange or
stock exchange group. In 18 cases, the stock exchange acquired a 100% or majority stake and in
eight cases, a minority stake. There were an additional 19 transactions where stock exchanges
acquired an exchange tha t was trading securities and derivatives other than stocks. After 2005, a
significant number of buy -side deals, with respect to related businesses such as information
technology and post trade services, can be observed:

Figure 5: Mergers and acquisitions in the stock exchange industry

Source: retrieved from Factset, OECD calculations; original link available:
http://dx.doi.org/10.1787/888933362454

34

The changes in the ownership structure of stock exchanges, as well as the structural changes that
follow ed from M&A activities have been accompanied by a shift in the revenue structure of stock
exchanges. Chart 6 compares in some detail the revenue structure of listed stock exchanges in 2004
and 2014. The share of revenues from listing new companies and issu er services, which consists of
new listing fees – including from exchange -traded funds (ETFs) – and fees paid by existing listed
companies dropped from 14% in 2004 to 8% in 2014. During the same period the share of revenues
from derivatives trading and ove r-the-counter (OTC) markets increased by almost half and
represented 22% of total revenues in 2014. This makes income from trading (cash, capital markets,
derivatives and OTC) the largest source of revenue with a total share of 48% in 2014.

Figure 6: Reve nue structure of stock exchanges

Source: Thomson Reuters, stock exchanges’ websites and annual reports; original link available
http://dx.doi.org/10.1787/888933362462

35

Traditionally, trading a specific stock in a single venue generated economies of scale and
network externalities that made stock exchanges considered as natural monopolies sustained by
regulatory advantages (Kay, 2006). However, technological advances have come to challenge that;
notably, communication technology that makes the geographical location of a trading venue less
important and information technologies that have drastically decreased costs and time required for
processing and disseminating large amounts of information, such as orders and quotes.
Today, trading is fragmented in two d imensions: 1) between stock exchanges (on -exchange)
and a large number of other trading venues (off -exchange); and, 2) between transactions where
investors have access to pre -trade information about buying and selling interests (lit or displayed
trading) a nd transactions where pre -trade information is not made available (non -displayed trading,
often referred to as dark trading).
In most advanced economies, trading in a company’s shares now takes place in many
different venues in addition to the stock excha nge where the company’s shares are actually listed.
Most important among these “off -exchange” venues are alternative trading systems (ATSs) in the
United States and multilateral trading facilities (MTFs) in Europe, which match buyers and sellers
for a tran saction. ATSs are not regulated like national securities exchanges. They must register as
broker -dealers and comply with Regulation ATS. Unlike national securities exchanges, ATSs are
not required to publicly disclose their trading services, operations or fees. MTFs are regulated as
investment services under the EU regulatory framework.
In addition to exchanges and off -exchange trading venues such as ATSs and MTFs, trading
can also be executed in a firm’s internal trading system (e.g. broker, dealer or inv estment bank).
When a firm “internalises” a client’s order in this way, it generally matches the order with its own
inventory of securities. This means that the client’s order is not routed to an exchange or an off –
exchange trading venue. Instead, it is ex ecuted on a bilateral basis within the internal trading
system of the firm and against its own portfolio.
Taking advantage of advancements in information and communication technology has been
facilitated by regulatory changes. For example, the EU’s Markets in Financial Instruments
Directive (MiFID 1), which was adopted in 2007, abolished the “concentration rule” that allowed
EU member countries to require investment firms to route equity orders only to stock exchanges, in
particular to the company’s listing exchange. Together with the recognition of the MTFs and

36
systematic internalisers as trading venues, the abolition of the concentration rule amplified
competition between exchanges and off -exchange trading venues in European equity markets.
Fragme ntation in European equity markets accelerated after MiFID 1 came into effect in
November 2007. The Directive allowed equity trading to be executed on MTFs, as well as on
traditional stock exchanges, and to be matched internally by investment firms (system atic
internalisers). The impact of MiFID 1 on market fragmentation in Europe has been significant.
Starting with the launch of the first MTF in 2007, in January 2016 there were 103 regulated
exchanges, 151 MTFs and 11 systematic internalisers in Europe acc ording to the European
Securities and Markets Authority’s (ESMA) database on MiFID (Annex 2).
Dark trading has existed for a long time in many stock markets. As noted above, it can take
place in many different forms including undisclosed orders on regulat ed exchanges, trading on
alternative trading platforms, off -order book trading on exchanges and other OTC centres. Trading
by using orders that do not appear in the visible order book has traditionally been associated with
the needs of institutional invest ors that want to reduce the market impact of large orders. This need
has become increasingly relevant as algorithmic trading and high frequency trading (HFT) have
increased in importance. With respect to the argument that dark pools 8meet the needs to plac e
large orders, the average trade sizes in ATSs in the United States in 2015 execute large trade sizes
of up to 500 000 shares. However, the top five ATSs in terms of average trade size account for less
than 3% of the total share volume executed in ATSs. T he top five ATSs in terms of volume traded,
which account for 49% of total share volume traded, had an average trade size between 153 and
233 shares. The average trade size in all ATSs was 207 shares, which is very close to the average
trade size in stock exchanges for the same period (209 shares). These findings suggest that ATSs,
with respect to the execution of large orders, do not distinguish themselves from the regulated
exchanges whose listed shares they are trading.
Policy response to these phenome na in the European Union is MiFID 1 and 2 (briefly
described in chapter II of this paper). MiFID 1 was adopted in 2007 and covers a broad range of
market rules related to market structure, transparency, supervision and investor protection. It also
include s rules related to trading and clearing of financial instruments, such as shares, bonds and
derivatives and the venues on which they are listed or admitted to trading. MiFID 2, which replaces

8 MAMUDI S. (June 13, 2014); Dark Pools Take Larger Share of Trades Amid SEC Scrutiny ; Bloomberg, available
online via www.bloomberg.com/mamundisam

37
MiFID 1, was approved by the European Council in May 2014. The E uropean Commission has
extended the original application date for MiFID 2 which was January 2017 to January 2018 in
order “to take account of the exceptional technical implementation challenges faced by regulators
and market participants” (European Commiss ion, 2016).
An important rationale for MiFID 1 was to promote competition between different trading
venues and decrease the costs for investors. MiFID 1 explicitly allows equity trading to be executed
on stock exchanges, MTFs and internal trading systems of firms (systematic internalisers).
However, and outside the scope of MiFID 1, it is also possible to execute trading on an OTC basis
outside of all these three venue types. Broker crossing networks, for example, without being
classified as any of these t hree categories and without being subject to related regulatory
requirements, are frequently used to execute trades in listed equities. MiFID 2 aims to ensure that
all multilateral trading is executed either on exchanges or MTFs; and that bilateral transac tions are
carried out on the internal trading systems of firms. Under certain conditions, it will still be possible
to carry out trading on a traditional OTC basis.
MiFID 1 also allows trading to be executed without orders being subject to pre -trade
transparency. There are four types of waivers from pre -trade transparency of orders: 1) large in
scale transactions, 2) transactions based on a reference price generated by another system, 3)
negotiated transactions; and 4) orders held in an order manageme nt facility of the trading venue.
MiFID 2 will maintain these waivers but introduce certain restrictions. Of particular interest
regarding fragmentation between lit and dark trading is the so -called “double volume cap
mechanism”. This mechanism stipulates that the dark volume of trading on any trading venue for a
particular share should not exceed 4% of the total trading volume on all trading venues in the
European Union, and 8% across all trading venues based on a 12 -month rolling calculation. The
caps wil l only be applied to dark trading that is making use of the reference price waiver and some
types of negotiated transactions. Importantly, the caps will not target dark trades under the waivers
for large in scale transactions and trades executed on an OTC basis. This means that the total
volume of dark trading under MiFID 2 may amount to 8% of the total trading volume that uses the
reference price waiver and some types of negotiated transactions plus all trading that makes use of
the large in scale and orde r management facility waivers plus all trading what is executed outside of
the three venues defined by MiFID 2.

38
2.2. Influence of the stock market transaction volume on the global financial market

Volume is one of the most basic and beneficial concepts to understand when trading stocks
on the global financial market. Volume is defined as, “the number of shares or contracts traded in a
security or an entire global financial market during a given period.” What this means is that each
time a person sells o r buys shares of a stock, that is considered volume.
It is not uncommon for stocks to trade millions of shares per day on the global financial
market. For example, the S&P 500 ETF (SPY) trades on average over 150 million shares per
market session. This is literally Billions of dollars’ worth of stock changing hands every day the
market is open. On the other hand, smaller company stocks, known as penny stocks, might trade
only a few thousand shares in each day. By understanding what volume is and how it is t racked,
one can use this knowledge in order to make better informed trading decisions.
There are two key benefits to tracking volume on stock exchange and on the global financial
market: If one investor places an order to buy 100 shares of stock at the cur rent Ask price, the stock
may not move up. But, if 20 investors all place buy orders of different quantities, the stock is most
likely going to move up in price because there are not enough sellers9. Bottom line, to break
through a key support or resistanc e level on a stock chart, volume is needed in quantity.
An important distinction is the Average Daily Volume – by knowing the total volume on a
day, one can understand the power of influence on a given stock in the global financial market. The
greater the volume, the greater the influence for the price to change. This allows to identify
accumulation and distribution days on a stock chart which can be used to identify current
momentum and predict future price movements.
Learning to identify volume trends and count accumulation or distribution day strings on a
stock chart does take practice. But, when applied correctly it can give the investor a huge advantage
in obtaining profits. Volume is a measure of how much of a given financial asset has been traded in
a given period of time. It is a very powerful tool, but it's often overlooked because it is such a
simple indicator. Volume information can be found just about anywhere, but few traders or
investors know how to use it to increase their profits and minimize risk on the global financial
market.

9 PERRY M.J. (January 18, 2013); World stock market capitalization closes year at $54.6 trillion. Available online at
www.aei.org. American Ente rprise Institute. Retrieved May 3, 2017.

39
For every buyer there needs to be someone who sold them the shares they bought, just as
there must be a buyer in order for a seller to get rid of his or her shares. This battle between buyers
and sellers for the best pr ice on all different timeframes creates movement while longer term
technical and fundamental factors play out. Using volume to analyze stocks (or any financial asset)
can bolster profits and also reduce risk on the global financial market.
Basic Guidelines for Using Volume: When analyzing volume, there are guidelines one can
use to determine the strength or weakness of a move. Traders are more inclined to join strong
moves and take no part in moves that show weakness – or may even watch for an entry in the
opposite direction of a weak move. These guidelines do not hold true in all situations, but they are a
good general aid in trading decisions on the global financial market.
Also, in the same concern it should be outlined the implications of the volume and market
interest. A rising market should see rising volume. Buyers require increasing numbers and
increasing enthusiasm in order to keep pushing prices higher. Increasing price and decreasing
volume show lack of interest and this is a warning of a potential reversal. This can be hard to wrap,
but the simple fact is that a price drop (or rise) on little volume is not a strong signal. A price drop
(or rise) on large volume is a stronger signal that something in the stock has fundamentally changed
on the global financial market.

Figure 7: A GLD daily chart showing rising price and rising volume.

Source: Retrieved on April 26, 2017 from www.freestockcharts.com

40
Next aspect of the discussion focuses on exhaustion moves and volume. In a rising or falling
market one can see exhaustion moves. These are generally sharp moves in price combined with a
sharp increase in volume, which signal the potential end of a trend. Participants who waited and are
afraid of missing more of the move pile in at market tops, exhausti ng the number of buyers. At a
market bottom, falling prices eventually force out large numbers of traders, resulting in volatility
and increased volume. One sees a decrease in volume after the spike in these situations, but how
volume continues to play out over the next days, weeks and months can be analyzed by using the
other volume guidelines.

Figure 8: A GLD daily chart showing a volume spike indicating a change of direction.

Source: Retrieved on April 26, 2017 from www.freestockcharts.com

Volume c an be very useful in identifying bullish signs. For example, imagine volume
increases on a price decline and then price moves higher, followed by a move back lower. If price
on the move back lower stays higher than the previous low, and volume is diminishe d on second
decline, then this is usually interpreted as a bullish sign on the global financial market.

41
Figure 9: A SPY daily chart showing a lack of selling interest on the second decline.

Source: retrieved from www.freestockcharts.com on 26 April 2017

To single out, there should be pointed out the implications of the volume and price
reversals: After a long price move higher or lower, if price begins to range with little price
movement and heavy volume, often it indicates a reversal on the g lobal financial market. There is
an important difference between volume and breakouts vs. false breakouts. On the initial breakout
from a range or other chart pattern, a rise in volume indicates strength in the move. Little change in
volume or declining v olume on a breakout indicates lack of interest and a higher probability for a
false breakout.
Volume should be looked at as relative to recent history. Comparing today to volume 50
years ago provides irrelevant data. The more recent the data sets, the more relevant they are likely
to be. Volume indicators are mathematical formulas that are visually represented in most
commonly used charting platforms. Each indicator uses a slightly different formula and, therefore,
a trader should find the indicator that wo rks best for their particular market approach. Indicators are
not required, but they can aid in the trading decision process. There are many volume indicators;
the following will provide a sampling of how several can be used on the global financial market.
On Balance Volume (OBV) is a simple but effective indicator. Starting from an arbitrary
number, volume is added when the market finishes higher, or volume is subtracted when the market
finishes lower. This provides a running total and shows which stocks a re being accumulated. It can
also show divergences, such as when a price rises but volume is increasing at a slower rate or even

42
beginning to f all. Figure 10 shows that OBV is increasing and confirming the price rise in Apple
Inc's (AAPL) share price. (For more on the OBV, see On -Balance Volume: The Way To Smart
Money.)

Figure 10: An APPL daily chart showing how OBV confirms the price move.

Source: Retrieved on April 26, 2017 from www.freestockcharts.com

One of the main concepts to be highlighted is Chaikin Money Flow. Rising prices should be
accompanied by rising volume, so this formula focuses on expanding volume when prices finish in
their upper or lower portion of their daily range and then provides value for the corresponding
strength. When close s are in the upper portion of the range and volume is expanding, the values
will be high; when closes are in the lower portion of the range, values will be negative on stock
exchange and the global financial market. Chaikin money flow can be used as a shor t term
indicator because it oscillates, but it is more commonly used for seeing divergence. Figure 11
shows how volume was not confirming the continual lower lows (price) in AAPL stock. Chaikin
money flow showed a divergence that resulted in a move back hi gher in the stock. (For related
information, see Discovering Keltner Channels and the Chaikin Oscillator.)

43
Figure 11: An AAPL 10 minute chart showing divergence that indicates a potential reversal.

Source: Retrieved on April 26, 2017 from www.freestockcharts.com

Fluctuation above and below the zero line can be used to aid other trading signals. The
Klinger volume oscillator sums the accumulation (buying) and distribution (selling) volumes for a
given time period. In Figure 6 one sees a qui te negative number – this is in the midst of an overall
uptrend – followed by a rise above the trigger or zero line. The volume indicator stayed positive
throughout the price trend. A drop below the trigger level in January 2011 signalled the short term
reversal. Price stabilized, however, and that is why indicators should generally not be used in
isolation. Most indicators give more accurate readings when they are used in association with other
signals on the global financial market.

Figure 12: An APPL d aily chart showing how Klinger confirms the uptrend.

Source: Retrieved on April 20, 2017 from www.freestockcharts.com

44
Volume is an extremely useful tool and, as can be seen, there are many ways to use it on the
stock exchange market and the global financial market10. There are basic guidelines that one can
used to assess market strength or weakness, as well as to check if volume is confirming a price
move or signaling a reversal. Indicators can be used to help in the decision process. In short,
volume is a not a precise entry and exit tool, however, with the help of indicators, entry and exit
signals can be created by looking at price action, volume and a volume indica tor.
Free movement of capital is one of the key elements in the EU single market, and is
enshrined in the Treaty of Maastricht. With the entry into force of this treaty in 1994 all
restrictions on capital movements and payments across borders were prohib ited. The aim of
liberalization is to enable integrated, open, and efficient European financial markets.
For European citizens, free movement of capital means the ability to carry out many
transactions, such as opening bank accounts abroad, buying shares i n non -domestic companies,
investing where the best return is purchasing real estate in another country. For companies, it
means being able to invest in, and own, other European companies raise money where it is
cheapest. The treaty on the functioning of th e EU does not define the term ‘movements of capital’.
In the absence of a definition, the Court of Justice of the European Union has held that the
definitions in the nomenclature annexed to Directive 88/361/EEC can be used to define that term.
According to these definitions, cross -border capital movements include foreign direct investments
(FDI) real estate investments or purchases securities investments (e.g. in shares, bonds, bills, unit
trusts) granting of loans and credit other operations with financial institutions, including personal
capital operations such as dowries, legacies, endowments, etc.
Amongst the fundamental freedoms that underpin the EU single market (free movement of
people, goods, services and capital), the free movement of capital is the most recent. It became a
directly applicable treaty freedom only with the Maastricht treaty. The legal framework for the free
movement of capital includes treaty provisions protocols and declarations transitional measur es
granted by the acts of accession to new member countries Article 63 of the treaty on the
functioning of the EU prohibits all restrictions on capital movements and payments not only within
the EU, but also between EU countries and countries outside the E U. However, further provisions
in the treaty stipulate a number of exceptions to the principle of free movement of capital, in

10 MITCHELL C. (2015); How To Use Volume To Improve Your Trading ; Retrieved from
www.investopedia.com/articles/technical/02/010702.asp; accessed online on 1 May 2017 .

45
particular to prevent problems related to taxation, prudential supervision of financial institutions,
public policy and security.
The Court of Justice of the European Union (CJEU) has the final say in interpreting treaty
provisions, and there is extensive case law in this area. The European Commission enforces the free
movement of capital by monitoring capital flows and ensuring EU countries properly apply the
rules of the Treaty. The capital markets union (CMU) is a plan of the European Commission to
build a true single market for capital in the EU by 2019. Under the CMU action plan, the European
Commission has started working with EU countries to examine the remaining national barriers to
the free movement of capital.An expert group on barriers to the free movement of capital composed
of representatives from EU countries was set up to exchange views in this area. In March 2017 the
Commission adopted a report looking at how to tackle national barriers with a view to fostering the
flow of cross -border investments in the EU.
The free movement of capital has the broadest scope of all treaty freedoms. It is the only
freedom that goes beyo nd the boundaries of the EU internal market, as it also includes capital flows
between EU countries and the rest of the world. Nevertheless, this freedom cannot exist without
sensible safeguards and protections. EU countries are legally allowed to take pre cautions to ensure
that foreign investment does not expose them to public security threats and the EU itself can act
either in emergencies or in normal economic circumstances to restrict this freedom11. The EU has
also led the way in promoting the free flow of capital internationally, advocating for lower trade
barriers and a level playing field for investments.

2.3. Stock market Indices – benchmark for performance

In order to have a better strategy on how the stock market operates and what are the latest
market tendencies, there are certain indicators that give a better understanding on how the market is
moving and what a company or investor might expect. A stock index or stock market index is a
measurement of the value of a section of the stock market. I t is computed from the prices of
selected stocks (typically a weighted average). It is a tool used by investors and financial managers

11 EUROPEAN COMISSION (2017) ; Financi al Markets and capital Movement; retrieved from
https://ec.europa.eu/info/business -economy -euro/banking -and-finance/ financial -markets/capital -movements_en,
accessed on 29 April 2017.

46
to describe the market, and to compare the return on specific investments. In other words, an index
is a mathematical con struct, so it may not be invested in directly. But many mutual funds and
exchange -traded funds attempt to observe an index , and those funds that do not may be judged
against those that do.
Stock market indices may be classified in many ways. A 'world' or 'global' stock market
index — such as the MSCI World or the S&P Global 100 — includes stocks from multiple regions.
Regions may be defined geographically (for example Europe, Asia) or by levels of industrialization
or income (e.g., Developed Markets, Front ier Markets).
In the same regard, it should be highlighted that a national index represents the performance
of the stock market of a given nation —and by proxy, reflects investor sentiment on the state of its
economy. The most regularly quoted market indice s are national indices composed of the stocks of
large companies listed on a nation's largest stock exchanges, such as the American S&P 500, the
Japanese Nikkei 225, and the British FTSE 100.
Other indices may be regional, such as the FTSE Developed Europe Index or the FTSE
Developed Asia Pacific Index. Indexes may be based on exchange, such as the NASDAQ -100 or
NYSE US 100, or groups of exchanges, such as the Euronext 100 or OMX Nordic 40. The concept
may be extended well beyond an exchange. The Wilshire 5 000 Index, the original total market
index, represents the stocks of nearly every publicly traded company in the United States, including
all U.S. stocks traded on the New York Stock Exchange (but not ADRs or limited partnerships),
NASDAQ and American Stoc k Exchange. Russell Investment Group added to the family of indices
by launching the Russel Global Index.
More specialized indices exist tracking the performance of specific sectors of the market.
Some examples include the Wilshire US REIT which tracks mor e than 80 American real estate
investment trusts and the Morgan Stanley Biotech Index which consists of 36 American firms in
the biotechnology industry. Other indices may track companies of a certain size, a certain type of
management, or even more special ized criteria — one index published by Linux Weekly News
tracks stocks of companies that sell products and services based on the Linux operating
environment.
Some indices, such as the S&P 500, have multiple versions. These versions can differ based
on how the index components are weighted and on how dividends are accounted for. For example,
there are three versions of the S&P 500 index: price return, which only considers the price of the
components, total return, which accounts for dividend reinvestment, an d net total return, which

47
accounts for dividend reinvestment after the deduction of a withholding tax. As another example,
the Wilshire 4500 and Wilshire 5000 indices have five versions each: full capitalization total return,
full capitalization price, flo at-adjusted total return, float -adjusted price, and equal weight. The
difference between the full capitalization, float -adjusted, and equal weight versions is in how index
components are weighted.
Following the thought, it should be also mentioned that an index may also be classified
according to the method used to determine its price. In a price -weighted index such as the Dow
Jones Industrial Average, NYSE Arca Major Market Index, and the NYSE ARCA Tech 100 Index,
the price of each component stock is the o nly consideration when determining the value of the
index. Thus, price movement of even a single security will heavily influence the value of the index
even though the dollar shift is less significant in a relatively highly valued issue, and moreover
ignor ing the relative size of the company as a whole. In contrast, a capitalization -weighted (also
called market -value -weighted) index such as the Hang Seng Index factors in the size of the
company. Thus, a relatively small shift in the price of a large company will heavily influence the
value of the index.
Traditionally, capitalization – or share -weighted indices all had a full weighting, i.e. all
outstanding shares were included. Recently, many of them have changed to a float -adjusted
weighting which helps inde xing. An equal -weighted index is one in which all components are
assigned the same value. For example, the Barron's 400 Index assigns an equal value of 0.25% to
each of the 400 stocks included in the index, which together add up to the 100% whole.
A modifi ed capitalization -weighted index is a hybrid between capitalization weighting and
equal weighting. It is similar to a capitalization weighting with one main difference: the largest
stocks are capped to a percent of the weight of the total stock index and t he excess weight will be
redistributed equally amongst the stocks under that cap. Moreover, in 2005, Standard & Poor's
introduced the S&P Pure Growth Style Index and S&P Pure Value Style Index which was attribute –
weighted. That is, a stock's weight in the index is decided by the score it gets relative to the value
attributes that define the criteria of a specific index, the same measure used to select the stocks in
the first place. For these two indexes, a score is calculated for every stock, be it their gr owth score
or the value score (a stock cannot be both) and accordingly they are weighted for the index.
One argument for capitalization weighting is that investors must, in aggregate, hold a
capitalization -weighted portfolio anyway. This then gives the ave rage return for all investors; if
some investors do worse, other investors must do better (excluding costs). Investors use theories

48
such as modern portfolio theory to determine allocations. This considers risk and return and does
not consider weights relat ive to the entire market. This may result in overweighting assets such as
value or small -cap stocks, if they are believed to have a better return for risk profile. These
investors believe that they can get a better result because other investors are not ve ry good. The
capital asset pricing model says that all investors are highly intelligent, and it is impossible to do
better than the market portfolio, the capitalization -weighted portfolio of all assets. However,
empirical tests conclude that market indices are not efficient. This can be explained by the fact that
these indices do not include all assets or by the fact that the theory does not hold. The practical
conclusion is that using capitalization -weighted portfolios is not necessarily the optimal method .
As a consequence, capitalization -weighting has been subject to severe criticism, pointing
out that the mechanics of capitalization -weighting lead to trend -following strategies that provide an
inefficient risk -return trade -off. Also, while capitalization -weighting is the standard in equity index
construction, different weighting schemes exist. First, while most indices use capitalization –
weighting, additional criteria are often taken into account, such as sales/revenue and net income
(see the “Guide to the Dow Jones Global Titan 50 Index”, January 2006). Second, as an answer to
the critiques of capitalization -weighting, equity indices with different weighting schemes have
emerged, such as "wealth" -weighted (Morris, 1996), “fundamental” -weighted (Arnott, Hsu and
Moore 2005), “diversity” -weighted (Fernholz, Garvy, and Hannon 1998) or equal -weighted
indices.
There has been an accelerating trend in recent decades to create passively managed mutual
funds that are based on market indices, known as index funds. Adv ocates claim that index funds
routinely beat a large majority of actively managed mutual funds; one study claimed that over time,
the average actively managed fund has returned 1.8% less than the S&P 500 index – a result nearly
equal to the average expense ratio of mutual funds (fund expenses are a drag on the funds' return by
exactly that ratio). Since index funds attempt to replicate the holdings of an index, they eliminate
the need for — and thus many costs of — the research entailed in active management , and have a
lower churn rate (the turnover of securities which lose fund managers' favor and are sold, with the
attendant cost of commissions and capital gains taxes). Indices are also a common basis for a
related type of investment, the exchange -traded f und or ETF. Unlike an index fund, which is priced
daily, an ETF is priced continuously, is optionable, and can be sold short.
A notable specialized index type is those for ethical investing indices that include only those
companies satisfying ecological o r social criteria, for example those of The Calvert Group, KLD,

49
FTSE4Good Index, Dow Jones Sustainability Index, STOXX Global ESG Leaders Index, Standard
Ethics Italian Index and Wilderhill Clean Energy Index. In 2010, the OIC announced the initiation
of a stock index that complies with Islamic law's ban on alcohol, tobacco and gambling. Other such
equities, such as the Dow Jones Islamic Market World Index, already exist.
Another important trend is strict mechanical criteria for inclusion and exclusion to p revent market
manipulation, e.g. in Canada when Nortel was permitted to rise to over 30% of the TSE 300 index
value. Ethical indices have a particular interest in mechanical criteria, seeking to avoid accusations
of ideological bias in selection, and have pioneered techniques for inclusion and exclusion of stocks
based on complex criteria. Another means of mechanical selection is mark -to-future methods that
exploit scenarios produced by multiple analysts weighted according to probability, to determine
which stocks have become too risky to hold in the index of concern.
Critics of such initiatives argue that many firms satisfy mechanical "ethical criteria", e.g.
regarding board composition or hiring practices, but fail to perform ethically with respect to
shareholders, for example Enron. Indeed, the seeming "seal of approval" of an ethical index may
put investors more at ease, enabling scams. One response to these criticisms is that trust in the
corporate management, index criteria, fund or index manager, and s ecurities regulator, can never be
replaced by mechanical means, so "market transparency" and "disclosure" are the only long -term-
effective paths to fair markets. From a financial perspective, it is not obvious whether ethical
indices or ethical funds will out-perform their more conventional counterparts. Theory might
suggest that returns would be lower since the investible universe is artificially reduced and with it
portfolio efficiency. On the other hand, companies with good social performances might be b etter
run, have more committed workers and customers, and be less likely to suffer reputational damage
from incidents (oil spillages, industrial tribunals, etc.) and this might result in lower share price
volatility.The empirical evidence on the performanc e of ethical funds and of ethical firms versus
their mainstream comparators is very mixed for both stock and debt markets.
To come back to the main definition, it is important to add that market index is an aggregate
value produced by combining several st ocks or other investment vehicles together and expressing
their total values against a base value from a specific date. Market indexes are intended to represent
an entire stock market and thus track the market's changes over time. Index values help investo rs
track changes in market values over long periods of time. For example, the widely used Standard
and Poor's 500 Index is computed by combining 500 large -cap U.S. stocks together into one index

50
value. Investors can track changes in the index's value over time and use it as a benchmark against
which to compare their own portfolio returns.
Market indices measure the value of groups of stocks. If an index goes up one level, or 1%,
this means a group of stocks has, correspondingly, increased its value by one l evel as well, thus
becoming more attractive to investors. The Dow Jones Industrial Average (DJIA), Nasdaq
Composite index and the S&P 500 are examples of market indices. The DJIA measures 30 stocks
traded on the New York Stock Exchange (NYSE) and the NASDA Q. These companies include
premier corporations like General Electric Company, the Walt Disney Company, Exxon Mobil
Corporation and Microsoft Corporation. The S&P 500 measures 500 stocks. The Nasdaq
Composite index goes further and monitors the daily value of the 4,000 stocks traded on the
NASDAQ National Market. Most investors prefer the S&P over the other market indices for its
accuracy. Another, the Wilshire 5000, sometimes called the "total market index," is a lesser known
index that keeps on top of all publicly traded companies based in the United States. All four indices
measure the daily performance of large companies. The Russell 2000, on the other hand, monitors
2,000 small undifferentiated companies in the market.
The value of the market index is also known as points. As such, when it is said that the
DJIA went up 400 points in a day, It means that its value increased from the previous day's rating
to the current day's rating, hiking the value of its composite compa nies to 400. Indices indicate the
financial health of an industry in which an investor has invested. So, if the DJIA drops and keeps
on dropping over the course of a month, for example, the investor might conclude that some of its
companies are in trouble. If he owns some of these stocks, he might reassess his portfolio and look
for other companies in which to invest.
Further, it will be analyzed a bit more in detail the contrast of the main market indices.
The Dow Jones Industrial Average (DJIA) is one of the oldest, most well -known and most
frequently used indices in the world. It includes the stocks of 30 of the largest and most influential
companies in the United States. The DJIA is what's known as a price -weighted index. It was
originally computed by a dding up the per -share price of the stocks of each company in the index
and dividing this sum by the number of companies —that's why it's called an average.
Unfortunately, it is no longer this simple to calculate. Over the years, stock splits, spin -offs, an d
other events have resulted in changes in the divisor, making it a very small number (less than 0.2).
The DJIA represents about a quarter of the value of the entire U.S. stock market, but a percent
change in the Dow should not be interpreted as a definite indication that the entire market has

51
dropped by the same percent. This is because of the Dow's price -weighted function. The basic
problem is that a $1 change in the price of a $120 stock in the index will have the same effect on
the DJIA as a $1 change i n the price of a $20 stock, even though one stock may have changed by
0.8% and the other by 5%. A change in the Dow represents changes in investors' expectations of
the earnings and risks of the large companies included in the average. Because the general attitude
toward large -cap stocks often differs from the attitude toward small -cap stocks, international stocks
or technology stocks, the Dow should not be used to represent sentiment in other areas of the
marketplace. On the other hand, because the Dow is made up of some of the most well -known
companies in the U.S., large swings in this index generally correspond to the movement of the
entire market, although not necessarily on the same scale.
Following the thought, the next index is Standard & Poor's 500 Index (known commonly as
the S&P 500) is a larger and more diverse index than the DJIA. Made up of 500 of the most widely
traded stocks in the U.S., it represents about 80% of the total value of U.S. stock markets. In
general, the S&P 500 index gives a goo d indication of movement in the U.S. marketplace as a
whole. Because the S&P 500 index is market weighted (also referred to as capitalization weighted),
every stock in the index is represented in proportion to its total market capitalization. In other
word s, if the total market value of all 500 companies in the S&P 500 drops by 10%, the value of the
index also drops by 10%. A 10% movement in all stocks in the DJIA, by contrast, would not
necessarily cause a 10% change in the index. Many people consider the market weighting used in
the S&P 500 to be a better measure of the market's movement because two portfolios can be more
easily compared when changes are measured in percentages rather than dollar amounts. The S&P
500 index includes companies in a variety o f sectors, including energy, industrials, information
technology, healthcare, financials and consumer staples.
On the other hand, there is also the Wilshire 5000 which is sometimes called the "total stock
market index" or "total market index" because almos t all publicly -traded companies with
headquarters in the U.S. that have readily available price data are included in the Wilshire 5000.
Finalized in 1974, this index is extremely diverse, including stocks from every industry. Although
it's a very comprehen sive measure of the entire U.S. market, the Wilshire 5000 is referred to less
often than the less comprehensive S&P 500 when people talk about the entire market.
The next outline is The Nasdaq Composite Index. Most investors know that the Nasdaq is
the ex change on which technology stocks are traded. The Nasdaq Composite Index is a market –
capitalization -weighted index of all stocks traded on the Nasdaq stock exchange. This index

52
includes some companies that are not based in the U.S. Although this index is k nown for its large
portion of technology stocks, the Nasdaq Composite also includes stocks from financial, industrial,
insurance and transportation industries, among others. The Nasdaq Composite includes large and
small firms but, unlike the Dow and the S& P 500, it also includes many speculative companies
with small market capitalizations. Consequently, its movement generally indicates the performance
of the technology industry as well as investors' attitudes toward more speculative stocks.
Another index wo rth mentioning is The Russell 2000, which is a market -capitalization –
weighted index of the 2,000 smallest stocks in the Russell 3000, an index of the 3,000 largest
publicly -traded companies, based on market cap, in the U.S. stock market. The Russell 2000 index
gained popularity during the 1990s when small -cap stocks soared, and investors moved more
money to the sector. The Russell 2000 is the best -known indicator of the daily performance of
small companies in the market; it is not dominated by a single ind ustry.
The Bottom Line is that is good to know what's going on in the many diverse segments of
the U.S. and international markets. If you're going to pick just one index or market to talk about,
you can't go wrong with the S&P 500, which offers a good ind ication of the movements in the U.S.
market in general12. By watching indices and keeping track of their movements over time, you can
get a good handle on the investing public's general attitude toward companies of all different sizes
and from varying indus tries.

12 SCHICK K.; (2017); An Introduction To Stock Market Indexes ; Retrieved from
http://www.investopedia.com/articles/analyst/102501.asp, accessed on 27 April 2017.

53
CHAPTER III STOCK MARKET TRANSACTIONS IN THE REPUBLIC OF MOLDOVA:
CHALLENGES AND OPPORTUNITIES

3.1 Overview of the Stock market in the Republic of Moldova

In any developed economy, the function of the securities market indicator is performed by
the Stock Exchange, appealing to perform functions of a well organized market thus ensuring the
place where the supply and demand meet. The result is the best price f or the buyers and the sellers.
The main purpose of a Stock Exchange is to develop an organized stock market, to create an
infrastructure and render services, ensuring conclusion of the civil -legal transactions between the
market's participants, the transa ction subject being the securities. All information about supply and
demand on the securities is concentrated in it, what creates the most favorable conditions for the
best rate of securities. Historic reference of the Stock Exchange of Moldova dates in De cember
1994. The Stock Exchange of Moldova (MSE) was set as a joint -stock company of closed type, was
established under the Law on securities circulation and stock exchanges. There were 34 promoters
– the securities market professional participants took pa rt in its establishing. First transactions were
held on June 26, 1995, accepted as the birthday of the Stock Exchange of Moldova. The legal and
organizational base, contributing to complex processes on the capital market, was created with the
Stock Exchang e's opening. Owing to the USA's support – the assistance was rendered by means of
the USAID Agency – the Stock Exchange is equipped with the advanced technology for stock
auctions. Since May 1995, it is an active member of the European -Asian Stock Exchang e
Federation (FEAS), established in 1995 on the initiative of the Stock Exchange of Istanbul.
The objective of the Federation is: to develop the capital markets of the member -states, in
particular to improve the organizational structure; to settle the pro blems concerning regulation and
self-regulation of the mechanism for brokers and dealers; to organize an efficient monitoring;
development of corporate governance principles, etc. Since July 2008, MSE is a member of the
International Association of the CIS Exchanges. The association was founded in Moscow in 2000,
in order to coordinate the efforts in the development of the financial markets in each state according
to the international standards. At the initial stage of the MSE's development, were set the st andards
for the statutory capital for the Stock Exchange.
Initially, the statutory capital was 238000 lei, and currently it increased until 500000 lei.
The equity capital adequacy norms, being of 1000000 lei, including guarantee fund adequacy

54
norms, acco rdingly. 30 % of the equity capital, which were set by the legislation, are currently
observed. In 1998, the MSE founded the National Securities Depository (NSD), a non -commercial
joint-stock company of closed type. The event coincided with the third anniv ersary of the first
auctions. At the same time with the capital market development, the MSE's share reduced, while
the stocks were divided between the NSD participants.
In 1998, the introduction of a new trading system integrated with the depositary syste m
gave the opportunity to operatively carry out transactions. The system implementation as well as
the NSD foundation became possible thanks to the American company Price Waterhouse and
USAID. In April 2000, the Stock Exchange of Moldova received the statu s of a self -regulating non –
commercial organization. As a self -regulating organization, the Stock Exchange is a constituent
part of the common mechanism of the securities market regulation, vested with corresponding
authority: it works out regulations and s tandards of its Members' activity. Since 2008, due to the
change of the securities market legislation the MSE lost its status of a non -commercial
organization, becoming a commercial one and therefore losing its status of a self -regulating
organization. The mechanism of the stock negotiations is governed by the MSE’s rules. Violations
committed during the stock exchange transactions are examined by the Stock Exchange
Disciplinary or/and Arbitration Commission. Starting with 2000, in order to reflect the capi tal
market trends, The National Commission introduced CNVM -32 index (at present CNPF). Through
the years the calculation of the index has changed.
The Structure of the Stock Exchange of Moldova The supreme ruling body of the Exchange
is the General Shareh olders Meeting. Between the general meetings a well -organized and efficient
management is performed by The Board of the company which consists of 18 persons, elected for
the term of 4 years. The auditing commission of the company shall exercise control ove r financial
and economic activities of the company and be accountable to the general meeting of shareholders
only. The Stock Exchange's activity is directly carried on by the Exchange's Departments,
performing the clearly fixed functions on the basis of th eir own Regulations on organization,
functioning, adopted by the Exchange's President. At present, the following departments and
subdivisions function at the MSE: Marketing, Listing and Quotation Department. It is engaged in
registering securities at the E xchange, in examining and including securities in the Exchange
listing. Listing is a system of the market support that creates favorable conditions for an organized
market, that allows to reveal the safest and the most qualitative securities and promotes t heir
liquidity.

55
A special role of the Exchange is its role as an information source, as organized market, as a
source of dissemination of information about securities. In the monthly bulletin "Bursa de Valori a
Moldovei" (the Moldova Stock Exchange), the Department publishes information on securities
admitted to circulation at the Stock Exchange, presents statistics and auction analysis, as well as
other information. Simultaneously, information on transactions, sale and purchase offers are
broadcast in mas s media and on the MSE’s website www.moldse.md. Market Supervision
Department – performs the following functions: observance of the laws and requirements of the
legislation in the Stock Exchange's activity; supervision of the activity of the Stock Exchange 's
Members settlement of legal matters. Electronic System Department. The Department's functions
are to control and support the Integrated Automated Trading System Stock Exchange (SAIT).
The Moldova Stock Exchange renders to its members and to those who a re interested, a
wide range of products and services, available on paper and electronic version. On the Moldova
Stock Exchange website there are free access to the statistics for the last 2 years, the buying and
selling orders and the daily negotiation pla n. At the same time, the stock exchange renders the
following paid services and products:
1.The informational bulletin "Moldovan Stock Exchange".
2. Information about registered companies at the Stock Exchange;
3.Daily, weekly and monthly statist ics.
4. Daily buying and selling orders.
5.Access to the stock archive of transactions since the foundation of the Stock Exchange until now.
An important regulatory body is the National Securities Commission is a public
administration body, undertaking, regulating, supervision, monitoring the capital market and
activity of its participants. It is entitled to take decisions, grant benefits, interfere, monitor, ban,
impose administrative and disciplinary penalties pursuant to the legislation.
The National C ommission conducts its activity pursuant to the requirements of the
Constitution, Law on the National Securities Commission, NSC's Regulation, other normative acts
and is independent in exercising its responsibilities. The National Securities Commission i s a
corporate body consisting of 5 members, including the Chairman and the Deputy Chairman. The
National Securities Commission's staff includes 7 Departments with 70 persons:

● Department of supervision, control and investigation;
● Department of licence and placements' regulations;

56
● Department of monitoring, economy and finance;
● Departament of market policy's elaboration and promotion;
● Department of international cooperation and integration;
● Public relations Department;
● Administrative Department.
In the domain of supervising and controlling the observance of the legislation regarding
securities market, the NSC activity is concentrated on regulating of the securities issue process and
the way of circulation, control of the legislation by securities issuers, professional specialists of
market. Also the NSC's activity includes application of necessary measures in cases of deviation
from the established requirements.
The function of the department of licence and placements' regulations is to regulate t he
professional activity of securities' market participants related to licensing activity on securities,
establishing requirements for qualification of professional participants, of dealers' firms specialists,
brokers, Investment Funds, Trust Companies, St ock Exchanges.
The function of the department of monitoring, economy and finance is to protect investors' interests
and to oversee the observance of Law by brokers, dealers, Investment Funds, Trust Companies.
The activity of the department of market poli cy's elaboration and promotion consist of
elaboration of draft, laws, providing expertise, developing and approving normative acts which
stipulate the activity of securities market, coordination of activity of different governmental bodies
regarding the se curities market.
The department of international cooperation and integration ensures the cooperation of NSC
with international bodies of the same level and the integration in these bodies, elaborates
international draft agreements on securities market, el aborates and completes the website of the
NSC in the "Internet". The public relations department provides the governmental bodies,
professional participants, and the general public with information regarding the activity of the
securities market, elaborate s the training programs for specialists in the securities market, and
organizes training and qualifications' improvement of these specialists.
The administrative direction is in charge of evidence of the NSC's staff, concludes the
documents regarding emplo yment, transfer and dismissal.

57
The first issue of 3444 Joint -Stock Companies was registered at January 1, 2000. The issue
volume was 11.304.476.718 lei. During 11 months of 1999 was registered the first issue of 121
Joint -Stock Companies. 13The issue volu me was 2.603.301.365 lei. The volume of the initial issues
was registered in 1999 was 2.602.731.554 lei.
The additional issues were registered by 650 Joint -Stock Companies on January 1, 2000,
out of which 111 Joint -Stock Companies in 1999. The volume of th e additional issues for 11
months 1999 was 307.795.263 lei. 141 Joint -Stock Companies with the foreign capital were
registered in Moldova till the present time. The volume of issue of Joint -Stock Companies with the
foreign capital was 1.983.322.073 lei. Th e share of the foreign capital is 54% in the Joint -Stock
Companies with foreign capital. During 11 months 1999 were registered the issues of 31 Joint –
Stock Companies with foreign capital. The total volume is 1.576.348.695 lei. During 11 months
1999 the vol ume of the transactions at Stock Exchange of Moldova was 374.629.039 lei. The
amount of sold securities was 67.309.120 units during this period. On the ex -pit market were
registered the transactions of 342.099.197 lei, the amount of sold shares was 11.321. 664 units.
Until the beginning of this year, in Republic of Moldova worked 138 economic agents
authorized to conduct activities on securities markets, including 35 Investment Funds, 42 broker
companies, out of which 14 commercial banks, 9 Trust Companies a nd 20 Trust management
organizations, 22 independent registrars, 8 Investment Fund depositors, National depositor on
securities and Stock Exchange of Moldova.

3.2 Legal framework concerning stock market in the Republic of Moldova

Stock market in the Repu blic of Moldova are regulated by various laws and normative acts.
Most important of these ones are:
● Law on entrepreneurship and enterprises /N 845 -XII, 03.01.92 with amendments of
04.08.92, 29.06.94, 13.12.94, 29.03.05, 28.11.95, 28.02.96, 26.03.96, 30.04.97, 22.07.97,
25.09.97, 27.02.98, 28.10.98, 23.12.98, 18.02.99, 15.04.99, 13.05.99;
● Law on joint stock companies /N 1134 -XIII, 02.04.97 with amendments of 23.12.98/.
● Law on securities market /Nr.199 -XIV, 18.11.98;

13 MOLDOVA STOCK EXCHANGE ; Overview of the Moldova Stock Exchange; . Retrieved from
http://www.moldse.md/default.htm accessed on 4 May 2017.

58
● Law on National Securities Commissio n /Nr.192 -XIV, 12.11.98;
● Law on investment funds /Nr.1204 -XIII, 5.07.97 with amendments of 09.07.99;
● Law on tax upon securities issue /Nr.1429 -II, 18.05.93 with amendments of 29.06.94,
5.04.96, 27.02.98;
● Law on State Debt and State Guarantees /Nr. 943 -XIII din 18.07.96;
● Law on Foreign Investments /N 998 -XII of 01.04.92 with amendments of 11.05.94,
27.07.94, 13.12.94, 26.03.96, 05.04.96, 11.02.98, 27.02.98, 29.07.98;
● Law on Bankruptcy /N 786 -XIII of 26.03.96 with amendments of 16.07.97, 06.11.98,
10.03.99;
● Law on licensing /Nr. 332 -XIV din 26.03.99 with amendments of 24.06.99;
● Tax Code /Law N 1163 -XIII of 24.04.97;
● Penal Code /Law of 24.03.61;
● Civil Code /Law of 26.12.64;
● Administrative Code /Law of 29.03.85;
● Intergovernmental Covenants on promotion and recip rocal protection of investments
(negotiated between the Republic of Moldova and Romania, Poland, Turkey, Kuwait, USA,
China, Germany, Bulgaria, Finland, Luxembourg Belgium Economic Union, Ukraine,
Uzbekistan, Sweden Confederation, Hungary, Great Britain);
● Decree of the President of RM "On fiduciary (trust) ownership" /Nr. 48, 16.02.94, with
amendments Nr. 281 din 17.10.94;
● Enactment of the Government of RM N 94 of 16.02.96 "On measures aimed at development
of the capital market in the Republic of Moldova";
● Enactment of the Government of RM N 698 of 25.07.97 "On priority actions for ensuring
transparency of information on the securities market and protection of shareholders' rights".

On 15 April 2011 the Moldovan Parliament passed the Act No. 73/2011 (Act No . 73) on
amending certain legal acts, among which the Act No. 1134/1997 on Joint -Stock Companies (JSC
Act). After being published in the Official Gazette, the corresponding amendments entered into
force on 3 June 2011. Act No.73 inserts new provisions on b uyouts of shares from minority
shareholders and implements new mechanisms vis -à-vis approving of the transactions with conflict
of interest, as well as other changes.

59
Act No. 73 has the scope to align, on one side, the JSC Act with the most recent
amendmen ts to the parallel legislation (e.g. on accounting, reporting, transactions with securities,
etc.) and, on the other side, with the latest practice in the domain (e.g. dealing with situations when
the voting rights were suspended by a court judgment and al ike).
The National Commission of Financial Market of Moldova is obliged to align its acts with
Act No.73 within three months as of 3 June 2011. The minority shareholder has been granted with
the right to request its share stake to be purchased by the share holder, that individually or jointly
with other affiliates, holds more than 90% of the joint -stock company’s voting shares.
To initiate the procedure, the minority shareholder has to submit a corresponding request to
the joint -stock company’s management, w hich in its turn is obliged to forward it to the majority
shareholder14. Upon receiving the corresponding request and within 30 business days the majority
shareholder has to communicate the purchase price, which has to be determined pursuant to the
law.
Accordingly, the purchase price for the minority share stake has to be at least equal with the
biggest of one of the positions set forth in Act No. 73. for example: the average transaction price
per share for the last 12 months before the day of notificati on about the request; or the value of net
assets pertaining to each share pursuant to the last audited financial situation; or the market value of
net assets pertaining to each share determined pursuant to a report by an estimation company and of
assets; o r the nominal value per share (Annex 3). A transfer of shares in such cases is performed by
way of a direct transaction.
Under Act No. 73, the general assembly of shareholders has been granted with the exclusive
right to approve the transactions with confl ict of interest where the value of such transactions
exceeds 10% of the joint -stock company’s value of its net assets, pursuant to the last financial
statement. Correspondingly, the transactions with less value can be approved by the joint -stock
company’s counsel, if any has been instituted by the shareholders.
Furthermore, the general assembly of shareholders has now the exclusive right to approve
and amend the code of corporate governance of the joint -stock company; also, to approve the
regulation on access of the shareholders to the various documents of the joint -stock company.

14 Law nr. 171 of 11.07.2012 on Capital Market. In Official Monitor of the Republic of Moldova Nr. 193 -197 of
14.09.2013.

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Given the recent court cases and discussions vis -à-vis the issue, the JSC Act has been
supplemented with the provision outlining that in case a voting right of a shareholder is suspended /
limited pursuant to the law or by a court judgment, the shares the voting right in respect of which
has been suspended / limited are not excluded counting and summoning the general assembly, and
when determining the quorum of the respective ge neral assembly.
Also the right of the shareholders to complain to the joint -stock company’s management,
National Commission of Financial Market and the court of law has been significantly detailed15.
Now each of the corresponding bodies can be addressed in specific cases (e.g. the court of law to
annul a transaction that was executed in breach of law, etc.).
Following the thought it should be outlined that the rule pursuant to which a joint -stock
company has to store its corporate and commercial documents / information for a period of three
years has been changed. As of 3 June 2011 such documents / information have to be stored by
joint-stock companies pursuant to the requirements and for the period set in the rules of the
National Archive Service which admin isters the Archive Fond of Moldova.
In summary, the new legislation brings clearer and more detailed norms on various aspects
regulating the activity of joint -stock companies. How the local participants and courts apply them
in practice will soon be seen.

3.3 Stock market development in Republic of Moldova

Total value of the securities market of Moldova has established at 7754.6 million Lei
(1693.3 million US dollars), which includes: corporate securities – 5450.6 million Lei (1190.3
million US dollars) ; Bank securities – 294.3 million Lei (64.3 million US dollars); Government
securities – 2009.7 million Lei (438.9 million US dollars).
Corporate securities form the biggest segment of the capital market. Total value of
corporate securities issues comprise d 5450.6 million Lei (1190.3 million US dollars), majority of
which, or 76.7%, equals the dematerialized shares of privatized enterprises. The emergence and
growth of the corporate securities segment were to a large extent determined by the fast pace of
incorporation and privatization between 1996 and 1997. This period in the national securities

15 Law no. 81 of 18.03.2004 on Investments in Entrepreneurial Activity. In: Official Monitor of the Republic of
Moldova Nr. 64 -66 0f 23.04.2004.

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market development is characterized by the fact that securities were acquired via National
Patrimonial Bonds (PBs) without the attraction of real monetary resources (cash). However,
foundation of the securities market served as a basis for an effective process of capital
redistribution to the benefit of new owners. Accordingly, this contributes to the development and
emergence of pre -requisites, necessary for achievi ng a more active and larger investment in country
economy.
Securities issued by commercial banks from another segment of the capital market. Volume
of shares issued by banks comprised 294.3 million Lei (64.3 million US dollars) and experiences a
sustained growth. Unlike the corporate securities segment, formation of the bank stock market was
initiated much earlier. Commercial banks' shares are in a sustained demand among investors, and
especially among institutional investors (i.e. corporations, companies, foreign investors). In
addition to bank stock, this segment includes such financial instruments as promissory notes and
savings certificates.
Government securities make the third segment of the Moldovan capital market. The
aggregate amount of these securit ies issues comprised 2009.7 million Lei (438.9 million US
dollars). Market of government securities is represented by the following financial instruments:
Government certificates – 1644.2 million Lei (81.8% of the total amount); Eurobonds – 345.0
million L ei (17.2%); Government bonds – 10 million Lei (0.5%); Treasury bills – 8 million Lei
(0.4%); Government internal interest bonds and 5% Government internal debentures issued in 1992
– 2.5 million Lei (0.1). At present, this securities market segment is one of the most liquid and
attractive for investments both for legal entities and individuals.
Presently, 2131 joint stock companies (JSC), including 2055 enterprises, 30 banks, 46
investment funds and trust companies, have been registered with the State Commi ssion for the
Securities Market (SCSM). Of them, 1553 (about 70%) are open -end JSCs and 578 (about 30%)
are closed -end JSCs. The majority of JSCs registered with the SCSM have only conducted one
share issuance – either privatization or foundation (for more information, click JSC Law). Thus,
total amount of securities issues registered by SCSM equals 2214, out of which 2031 are
foundation issues. Out of 181 additional issues, the majority were carried out by commercial banks
(68 issues) and privatization inv estment funds (42 issues).Now a great deal of attention is focused
on the problems of transparency and information disclosure regarding the activity of enterprises –
issuers. SCSM developed and approved special requirements for open -end JSCs published report s

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and prospectus of issuance (Annex 4). The major task at this stage of market development is to
begin implementing and exercising the SCSM decisions that reflect these new requirements.
Over the mass privatization period, the Moldovan population was the principal group of
investors and used PBs as the main investment instrument. At present, people are beginning to use
cash to acquire shares. Pursuant to the State Statistics Department, for January – May 1997, cash
returns received by the population exceed ed expenditures by 630.8 million Lei (137.8 million US
dollars).
Presently, a significant investment interest is manifested by bank institutions and foreign
investors. Thus, banks prefer to participate in the capital market using the traditional methods:
granting credits, attracting deposits. This activity ensures a sufficient profitability ratio – on the
average, annual interest on bank credits comprises approximately 35%. At the same time,
diversification of banking activity gets combined and accompanied by a more active involvement
of banks in the securities market. Thus, banks have actively manifested themselves as dealers and
investors in the market of government securities . In addition, they act as intermediaries in the
secondary market of such securi ties, as well as grant credits collateralized by securities. Possessing
a considerable investment potential, banks are capable of effectively managing not only their credit
portfolio, but securities portfolio as well. Also, a certain investment interest is manifested by
foreign investors which is directed at establishing joint ventures and enterprises consisting totally
of foreign capital. In addition, these investors look at creating an investment portfolio consisting of
corporate and Government securities .
In Moldova, secondary circulation of securities takes place both in the exchange market and
over-the-counter (OTC) market. The tendency of sustainable increase in the activity with securities
retains in the Moldovan secondary market. Thus, in the first h alf of 1997, total volume of securities
traded in the secondary market comprised about 116.8 million Lei (25.5 million Lei US dollars)
which constitutes approximately 4% of the Gross Domestic Product (GDP) of Moldova (Cf. in
1996 this index comprised 0.4%) . If compared to 1996, total value of transactions increased 4
times, while average monthly volume of performed transactions went up nearly 8 times and
comprised 19.5 million Lei (4.3 million US dollars). In 1997 total volume of exchange trades
comprised a bout 45% of the aggregate transactions, while in 1996 exchange trades were only 40%.
To ensure an efficient mechanism for securities circulation, an unbiased price estimation
and market transparency, in December 1994 the Moldova Stock Exchange (MSE) was fo unded.
The official opening of the MSE and its first trades took place on June 26 , 1995. At present, the

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MSE trading activity is characterized by positive dynamism and sustainability. Shares of 638
issuers were registered and allowed to be traded through the MSE, and 16 issuers were included in
the exchange listing. Shares of 179 issuers were involved in exchange trades which is 2 times
higher than in 1996. Total value of transactions performed in the first half of 1997 amounted to
52.4 million Lei (11.4 m illion US dollars), which represents an increase by about 5 times compared
to the previous year. At the same time, average monthly value of trades grew from 958 thousand
Lei in 1996 to about 8.7 million Lei (1.9 million US dollars) in the first 6 months of 1997. The
analysis of the situation with prices for shares traded through the stock exchange demonstrates that
the tendency of selling shares at prices equal to their par value remains. Thus, shares of 105 issuers
(55% of the total number of issuers parti cipating in trades) were sold at prices equal to par value;
shares of 63 issuers (or 35%) – below par value; shares of 11 issuers (or 8%) – above par value.
OTC transactions are performed directly between buyer and seller either with or without
broker's p articipation in these trades. These transactions are not included in exchange bulletins.
Over the first 6 months of 1997, shares of 378 issuers were involved in OTC trades, which exceeds
nearly 1.5 times the number of issuers participating in 1996 trades. Registrars have registered
transactions involving approximately 8.7 million shares at a total value of 64.4 million Lei which is
3.7 times higher than the entire year of 1996. On average, securities traded every month a mounted
to 10.7 million Lei (2.3 mil lion US dollars) or by 7 times exceeding the same index for 1996.
Broker/dealers participated in the negotiation of approximately 17% of all OTC transactions (worth
11.1 million Lei) and, the remaining 83% (53.3 million Lei) were negotiated directly betwee n
investors. If compared to the exchange market, in the OTC market transactions are, in the majority
of cases, negotiated at prices below the par value. Thus, in the first six months of 1997, trades with
shares of 175 issuers (46% of the total number) were registered at prices below par value; shares of
165 issuers (43%) – at prices equal to par value; and shares of 38 issuers only (1%) – at prices above
par value.
Presently, there are 140 professional securities market participants operating in Moldova,
including 42 privatization investment funds, 10 trust companies, 25 independent registrars, 8
investment management companies, 1 specialized depository and 54 professional participants the
Charter of stipulates broker/dealer and depository activity (19 out o f them are banks). The MSE is
the central infrastructure institution meant to ensure performance of operations involving securities
in the secondary market. Furthermore, the necessary legal basis for the establishment and operation
of self -regulatory organ izations (SRO) has been created in Moldova. Now the SRO network

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includes Association of Joint Stock Companies, Association of Professional Securities Market
Participants, National Association of Brokers/dealers and Association of Trust Companies.
Investme nt funds and trust companies are the most active participants in the securities
market. The latter is mainly substantiated by the role they played in the privatization via PBs which
was carried out over 1995 to 1996. Over 2.2 million citizens in Moldova (o r 51%) have become
shareholders of investment funds and clients of trust companies.
At present, investment funds are actively involved in investment portfolio management.
Thus, they are engaged in transactions involving purchase and sale, the exchange of p rivatized
enterprises' shares out of their portfolio, and transactions with other securities. According to data on
investment funds' portfolio turnover, value of securities bought and sold over the first six months of
1997 comprised 57.7 million Lei (12.6 million US dollars) which constitutes approximately 50% of
the total volume of transactions performed in the secondary market. Trust companies continue to
manage shares of privatized enterprises, perform purchase and sale operations for the purpose of
gaining profit for their trust founders, and participate in shareholders general meetings of privatized
enterprises on behalf of their clients.
The 54 professional securities market participants, the Charter of which stipulates the
performance of broker/dealer activity, are currently operating in the securities market of Moldova.
Of them, 19 are represented by banks. Out of these professional participants, 29 are accredited
brokerage companies within the MSE. To ensure guarantees to clients upon performance of
transactions, the SCSM established requirements for the minimum amount of the statutory capital
held by brokerage companies. This amount should not be less than 15,000 Lei (3,276 US dollars) in
the event of commission activity and 50,000 Lei (10,919 US dol lars) for commercial activity.
Statutory capital of non -banking brokerage companies comprised 893,547 Lei (195,140 US
dollars), which averaged approximately 35,700 Lei (7,796 US dollars) per company. A positive and
clear -market dynamics can be traced in th e activity of broker/dealers characterized by an increase
in number of transactions performed. Transactions performed by non -banking brokers from the
beginning of the year equal 102.8 million Lei ( 22.5 million US dollars), approximately 5 times
greater th an the amount in 1996.
Decisions and regulations of the SCSM (about 20 normative statutes) have formed the legal
basis for the share registry activity in the capital market. This activity can be performed by both
independent registrars and issuers themselv es (provided the amount of holders of their securities
does not exceed 300). This activity for independent registrars in the securities market is considered

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an exclusive one. At present, 25 independent registrars and 41 issuers that maintain their own shar e
registries function in Moldova.
After the division of the issuers \rquote market among registrars and the completion of share
registries' formation, the activity of registrars is focused on exercising re -registration of ownership
rights for shares and pre paring for general meetings of shareholders (registration of shareholders
attending the meeting, participation in the activity of the tabulation commission, etc.). At present,
independent registrars have negotiated more than 1500 share registry agreements, and manage
about 2.8 million personal client accounts.
To create the adequate and proper conditions for the functioning of independent registrars,
and to prevent them from being exposed to some possible risks, the SCSM requires the minimum
value of statutory capital for independent registrars to equal 50,000 Lei (10,919 US dollars). De
facto, this requirement is enforced by practically all independent registrars.
The institute of depositories meant to ensure storage and record -keeping of assets for
investment funds and trust companies presently equalling 15 entities includes 14 banks and a
specialized company "DEPO -Centru" . Depositories are at the initial stage of activity and it is
basically focused on storage of investments institutions' securities .
At the end of the time period 09.03.2015 – 13.03.2015, the value of the index did not
register any changes, and was equal to 431.06 points (details in the Figure 11 below).
Compared to the same period of year 2014, the index value decreased by 1.86 poin ts
(0.43%), thus reflecting a decrease of stock capitalization of the securities belonging to the
issuers included in the index calculation portfolio:
Figure 13: The development of share price index, 2015

Source: Re trieved on April 20, 2017 from www.moldse.md

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The volume of transactions at the Moldovan stock exchange continued dropping and it
constituted 9.2 million lei in May against 9.4 million lei in April 201516. According to the data by
the Moldova Stock Exchange, 162 transactions were effecte d in May that was 45 transactions more
than in April. The most considerable amount of transactions was effected in the section for direct
transactions and they constituted 70% of the total turnover of the Stock Exchange.
The sum of transactions on the sale of public property was insignificant against the previous
periods – 21 thousand lei. Blocks of shares in six joint -stock companies, offered for the sale by the
Gagauz Public Property Department failed to attract buyers.
Some specialists argue that the mar ket decline is connected with both external and internal
factors, – almost all the foreign portfolio investors withdrew their financial resources from the
republic and internal investors do not effect any transactions due to the decrease of free financial
resources and the production stagnation, as well as due to the political instability’ in Moldova.
Same specialists consider that the stock market will continue shrinking and this situation will last
for at least one year.
It is also believed that the mar ket recovery will begin after the first signs of the production
and economy growth appear, but it will happen considerably later than in the developed countries.
Small jumps will be registered during this period, when some shareholders will offer their
businesses and assets for sale, in order to repay their debts.

16 MOLDOVA STOCK EXCHANGE ; Overview of the Moldova Stock Exchange;. Retrieved from
http://www.moldse.md/default.htm , accessed on 4 May 2017

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CONCLUSION

The main findings of this graduation paper outline the fact that regulatory reforms and
developments in information and communication technology have increased competition between
different types of stock trading venues. The result is fragmentation in two dimensions. First, we
find extensive fragmentation of trading between stock exchanges and off -exchange venues, such as
alternative trading systems (ATSs) and multilateral trading facilities (MTFs). Second, we also find
an increased fragmentation between da rk (non -displayed) trading and lit
(displayed) trading.
In the same regard, it is important to highlight that off -exchange trading and dark trading
have often been seen as a way for investors to reduce the market impact that could occur if they
place lar ge orders on a stock exchange. However, the analysis of trading data for the European
Union indicates that average order sizes do not differ significantly between off -exchange venues
and traditional exchanges. Also, fragmentation does not seem to have affe cted the distribution of
trading in large and small company stocks. Moreover, the distribution of trading in large and small
company stocks is fairly similar in countries with fragmented trading venues and countries where
trading is concentrated. Since 200 0, trading in the 10% largest companies has accounted for 70 –
90% of all trading, both in the United States and European Union.
The main concerns with respect to increased off -exchange and dark trading are the quality
of the price discovery process, the fai rness of markets, and the level playing field among investors.
Together with recent enforcement actions against some dark pools, this has opened up a discussion
about the rationale for existing differences in regulatory regimes between trading venues that seem
to serve similar functions. Looking ahead, it is likely that regulatory initiatives in both Europe and
the United States will come to focus on regulatory convergence between exchanges and off –
exchange venues. It remains to be seen what the effects wil l be in terms of stock market
fragmentation.
In regard to Republic of Moldova, it should be outlined that it is a country going through
positive changes covering all areas of development, which will ensure a stable free democratic state
in the South – Eastern Europe. Based on the conducted research concerning the stock market
transactions of the Republic of Moldova following conclusions were drawn:

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1. Analyzing the literature and the didactical works, it is important to outline the importance
and impact of th e volume of the stock market transactions in the economic life, becoming
one of the main engines for development.
2. Analyzing the legal and institutional framework on stock transactions in the European
Union and Republic of Moldova it should be mentioned th e efforts in crystallization of the
legal system, based on the latest example of implementing the new Law on Capital Markets
of the Republic of Moldova, in force from 14.09.2013. In the same context, indicating the
capitalization of the opportunities deriv ed from the above mentioned phenomena such as
structuring a state policy oriented towards European Union integration, developing the
public -private partnership, giving benefits for investors, creating prerequisites for
developing a new financial instituti on and instruments.
3. Examining the informational data base and statistical data concerning stock market
transactions in the Republic of Moldova, it was observed that there are no active
institutional investors on the capital market, besides banks, and still the activity of banks is
reduced only to the consolidation of shares’ packages of existing shareholders, thus, the
capital market and stock market remains outside the interest of strategic investors. But,
considering the actual development conditions of t he domestic capital and stock market,
there is a decisive need to revitalize the activity of institutional investors in our country.
To conclude, this graduation paper presented the perspective of stock market and its impact
of the transactions vo lume both in the European Union and the Republic of Moldova, by presenting
the reality and the perspectives that can be capitalized. Thus, underlining the importance of
strengthening the national and international regulations concerning the stock market.

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ANNEXES