1. IntroductionIt is a fact nowaday

1. Introduction
It is a fact nowadays that derivative markets have penetrated the whole economic
environment, through standardized and non-standardized financial vehicles. Many
researchers argue that derivative markets contribute to the price discovery process and
to the completeness of the corresponding spot markets, causing in most cases
stabilization effects. An important dimension of the structure of financial markets
is the financial market regulation, according to which the corresponding regulatory
authorities make decisions towards an efficient functioning of financial markets. The
regulatory board of the derivative exchanges makes several decisions regarding the
legal trading framework, the level of margin requirements, the price limits, the trading
hours and the derivative listing process. Although, over the past years the derivative
exchanges committee worldwide supported a strict policy in order to guarantee the
completeness of the market, nowadays they adopt a system with higher degrees of
freedom.
The objective of this paper is to examine empirically the specific criteria that the
competent authorities of the Athens Derivatives Exchange (ADEX) have taken into
account in the derivatives listing process for individual shares. According to the relevant
literature, the members of the exchanges consider various characteristics such as
capitalization, trading volume and volatility. Moreover, regulators also consider the
viability of exchanges which is related to the creditworthiness of the listed firms.
The econometric part of the paper consists of two steps. The first step, deals with the
estimation of the volatility, the default probability and the corporate governance
provision index for each candidate firm. The second step consists of the utilization of
a logit regression for the determination of the regressors and their significance in
explaining which firms should be included into the derivatives and non-derivatives
groups. This analysis is extended through a rolling window technique that captures the
time varying characteristics of the estimated coefficients of the derivatives listing
strategy implemented by the ADEX.
The remainder of the paper is organized as follows: Section 2 contains the literature
review, Section 3 underlines several theoretical issues, Section 4 explains the data
collection process and the applied research methodology, Section 5 explains the
empirical findings and finally Section 6 concludes the paper