1 Impact of Legislation on the Iceland Stock Exchange

• Main Author: Professor Agust Einarsson
• Other Authors: The Pennsylvania State University CiteSeerX Archives
• Format: Text
• Language: English
• Subjects: Iceland stock exchange; stock exchange legislation; fisheries; equity trading JEL; G12; G30; K22; K40; Iceland
• Online Access: http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.198.2705; http://www.joensuu.fi/taloustieteet/ott/scandale/helsinki/pdf/einarsson.pdf

The paper describes the impact of legislation concerning securities exchanges on the volume of stock trading in Iceland and on stock prices. Organised trading in stocks in Iceland has only been going on for 12 years, but has been increasing rapidly in recent years. The first legislation exclusively concerned with trading of this kind entered into force in 1993, but extensive changes were made when Iceland became a party to the Agreement on the European Economic Area in 1994. The principal legislative acts on equity trading in Iceland date from 1993 and 1998. The paper addresses the impact of individual legislative reforms on trends in equity trading in connection with other influencing factors, such as general economic trends and the situation in the fisheries sector, which has traditionally accounted for a substantial part of the total volume of equity trading in the regulated stock market in Iceland. Specific attention is given to the impact of legislation on public control. Iceland became a NOREX partner in 2001, and comparison with other Nordic countries shows that, as a result of the significant growth in recent years, the Icelandic stock market has reached proportionally the same volume as the stock markets in other Nordic countries. Legislation has gradually reduced transaction costs, as formal rules have replaced informal rules, thereby reducing uncertainty and improving the quality of information in relations between buyers and sellers.