Abstract

Well functioning stock markets are vital for each and every economy. Apart from acting as barometers for their respective economies and helping in raising capital for businesses, stock markets also help in the mobilization of savings for investment and redistribution of wealth through dividends and capital gains. Available information however indicates that the performance of most African stock exchanges is still fledgling and leaves a lot to be desired. Trading activity and volumes are still very low in most countries. This research was therefore carried out to find out if trading structures are one of the causes of the lower performance in terms of trading volumes on the Malawi Stock Exchange (MSE). Primary data was collected from thirty high net-worth individuals from Blantyre and Lilongwe while the secondary data was collected from three stock exchanges namely the Dar-Es-Salaam Stock Exchange, the Ghana Stock Exchange and the Johannesburg Stock Exchange. A combined research strategy was used in order to meet the following study objectives: first, to investigate the relationship between trading structures and share trading volumes and secondly, to explore the differences and similarities between the MSE trading structures and those of other stock exchanges. Primary data was collected through self administered questionnaires and face-to-face interviews while secondary data was collected from the Internet and the African Securities Exchange Association yearbook. Data was analyzed using Statistical Package for Social Sciences (SPSS) and Microsoft Excel. Results of this study have established that trading structures are related to share trading volumes and that the MSE trading structures are among the least developed. In case of MSE, the trading structures are negatively affecting share volumes. They are posing problems of mainly accessibility by people outside Blantyre and delays in the whole trading process because it is manual, has a long settlement cycle, and it has few brokers who are also just located in Blantyre. This situation can however be addressed by acquiring an automated trading system which will be more accessible, by increasing the number of brokers on the scene and by reducing the number of settlement days among other things. This study has concluded therefore that the better the trading structure, the higher the volumes will be on the MSE. Accessibility to the exchange will be increased with an automated system and with more brokers just like in initial public offerings (IPOs). Also if the length of settlement days is to be reduced, volumes will also increase, as people will be able to trade even short-term funds.

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School	: School of Law, Economics and Government
Issued Date	: 2008

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