International Financial Futures and Options Exchange in 2002. EURONEXT LIFFE
merged with NYSE in 2007.
Another example of an intercontinental merger is the Intercontinental Exchange
(ICE) as well as the formation of the world's largest stock exchange – the Chicago
Commodity Group (CME Group).
Figure 1. The scheme of stock consolidation
Source: Own elaboration
Consequently, the trend of global consolidation through the merger of electronic
stock exchanges of financial derivatives continues causing interest and study of this
process (fig. 1). The experience of consolidation processes on the global stock market
will be a vivid example and one of the first steps towards the development of the
domestic stock market of financial derivatives.
Financial risk management which is based on financial derivatives. The
global financial crisis has clearly identified and reinforced the role of financial risks.
The study of international practice has shown that the main financial risks on the stock
exchange are in some way related to the work of trade infrastructure. In other words,
stock risks arise precisely when it comes to close contracts. International practice now
identifies such major types of risks.
First of all, this is the risk of a failure of any financial system in the event of
bankruptcy of its emerging and systemically important financial institutions, the so-
called systemic risk. There is no single specific definition for systemic risk.
In addition to systemic risks, the US Federal Reserve has identified the following
four main risks in payment, clearing and settlement systems (fig. 2):
- credit risk is the risk which occurs when one party of the stock exchange for
some reason does not fulfill its obligations in its operation in full and for a certain
period;
- liquidity risk, liquidity fall risk or liquidity lowering risk – which occurs in the
event that one of party of the contract at a specified time does not fulfill its obligations
in full due to a temporary lack of funds. The liquidity risk differs from the credit
because it is not a consequence of the insolvency of the party, because there is a
possibility that it will repay the debt in the near future;
Domestic stock exchange
Domestic commodity
exchange
World stock market
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