The Stock Exchange

The Stock Exchange

The Stock Exchange is a vital part of the economy of any nation; most people see it as a way for them to create wealth, which is far from the trust. It is more than just a place where brokers can sell and buy company shares. The stock exchange gives business access to much-needed capital as well as a means to enhance their public image and visibility. Visionary businesses utilize stock power to improve and grow their companies. However, there are considerable regulatory and financial that a company must incur when they become listed on a stock exchange, but these costs are minor compared to the benefits that a company gets when they are listed. The stock market basically regulates the economy of any nation; they indicate the performance of the economy; by observing the performance of a certain nation’s stock exchange market, one can tell how the economy of that particular country is doing. The paper will discuss and compare the stock exchange markets of both the United States of America and Qatar by analyzing their recent history and performance to understand why they are and where they are in terms of their impact on the global and their respective economies.

The United States stock market has two major players, the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotation (NASDAQ). They are two of the biggest stock exchange in the world. They have revolutionized the stock exchange market in the past 2 decades or so. For instance, NASDAQ is the first exchange to incorporate virtual trading, which has given stock exchange a fresh and exciting dimension. From the early 2000s, the stock market changed completely for the better thanks to technological advancements; it changed the investing paradigm over the past two decades.

The US stock exchange’s technological advancements paved the way to online brokerages, where an investor can pay lower commissions on trades compared to full-service brokerages. The low commission resulted in rapid trading and enhanced the stock market. Also, the bid-ask spread was narrowed significantly following decimal pricing for all stocks implementation in 2001. Another significant development is exchange-traded funds (ETF), which simplified trading for investors on both local and overseas markets. Due to these changes, there has been a rise in trading volumes since the new millennium turn. For example, the NYSE trading volume on January 4, 2001reached an all-time high of 2 billion shares. The record was then broken on February 27, 2007when 4 billion shares were traded. The current stock market has become globalized, which has allowed world markets to have a closer relationship. The developments have made the stock market more challenging for investors as a simple change from the other side of the world can start a global reaction worldwide. Recently there have been new trends mostly in the stock market in the US, like zero commission platforms, roboadvisors, and algorithmic trading, and socially responsible investing. The US stock exchange continues to set new trends and improve the investor’s experience every day.

Unlike the US stock exchange that started was launched more than a century ago, the Qatar stock exchange (QSE) was started in 1995, and since then, it has resulted in the nation’s capital market development that is still going on. It is regulated by the Qatar Financial Markets Authority (QFMA), which was established in 2005 under Law No. 33 to supervise and regulate Qatar’s financial markets. QSE became a platform on which sustainable development and economic diversification were built. It has grown exponentially to become the leading stock exchange market in the GCC region. The QSE introduced its first automated trading in 2001 and launched its first website the following year. Like in America, the QSE allowed foreign investors to buy listed shares, albeit up to 25%; this was after an Amiri decree was issued in 2005. In 2009, Qatar Investment Authority or QIA signed an agreement with NYSE Euronext to form a new world-class market. This new entity was later named the Qatar stock exchange.

The US stock market has many strict restrictions that govern how trading is done, ensure it is fair and done the right way, and punish those who break the rules. This market is controlled and regulated by the Securities and Exchange Commission (SEC). The SEC is responsible for monitoring and enforcing laws so as to govern the US securities market. Over the years, there has been enacted to improve the stock market. On July 30, 2002, the Sarbanes-Oxley Act 2002 was signed into law by President Bush. The Act brought several reforms to improve corporate responsibility, end accounting fraud, and improve financial disclosure, among others. This regulatory body has played a crucial role in making the US stock market the success it is today. The US stock market also has standards that it follows known as Generally Accepted Accounting Principles or GAAP, they are rules that govern financial reporting and corporate accounting in the US. Every company operating in America must observe these practices and methods.

The QSE achieved another milestone in 2011 when they launched the Debt-Market and listed its first tranche of Treasury-Bills in addition to the launching of the DVP settlement process. The QSE continued its trailblazing in this region in 2013 by announcing that they were ready to list SMEs and provide them with a financial platform to improve the sector and consequently take the economy even higher. This fast rise to the top in the region led to GSE being upgraded to emerging market status. The QSE reached a new height in 2018 when it attracted 2.5 billion dollars of net foreign inflows and listed its first 2 ETFs, the largest in the GCC region.

One of the factors that have perhaps contributed to this unprecedented rise is due to the fact that the country is a huge producer of oil, which is the main contributor to Qatar’s economy. This, therefore, attracts a huge number of investors. This, therefore, influences the QSE market, for instance, when the oil prices fall and so on. This is another key difference between the QSE and the US stock exchange market, overreliance on oil, something that they are looking to diversify from. Another main difference between the two stock exchange markets is the financial reporting standards they have adopted. American stock market uses GAAP while QSE uses IFRS (International Reporting Standards).

The two stock markets have been performing considerably well in the past few years. The QSE has risen to become one of the best two leading stock markets in the GCC region; it has an excellent market performance. In September 2015, its market capitalization rose to over 605 billion Qatari Riyal (QR) compared to 2010 when it was 320 billion QR. The United States stock exchange market has also been performing very well for the best part of the 2010s; this period has proven the best has proven to be one of the best for investors. It has been performing so well that this was the only decade that the US economy never went into recession. Therefore the two stock exchange markets are one of the best globally, and their performances have proven vital for the two economies, and long may it continue.