Did the virtual integration of stock markets impact the stock exchanges in Southeastern Europe?

Abstract

This study investigates the impact of the SEE Link trading platform on capital market development and financial integration in Southeastern Europe (SEE). Established in 2016 with support from the European Bank for Reconstruction and Development, SEE Link sought to enhance market depth, liquidity, and cross-border connectivity among relatively small regional stock exchanges. Using a difference-in-differences framework complemented by correlation and cointegration analysis over a ten-year horizon, the paper evaluates the platform’s effects on market performance and integration. The findings reveal only modest outcomes: turnover ratios increased marginally, while market capitalization to GDP, traded value to GDP, and portfolio equity net inflows showed no significant changes. Short-term return correlations among member exchanges remain weak, and long-run cointegration was absent both before and after the platform’s introduction. Persistent structural, regulatory, and technical barriers–including market fragmentation, heterogeneous legal frameworks, high transaction costs, unlinked central securities depositories, and limited visibility–continue to hinder meaningful integration.