Derivatives Exchange in Morocco: Dream or Reality? - Market demand and lessons from other exchanges

Abstract

Morocco is currently experiencing a liberalisation process involving major industries within its growing economy. This growth involves unique and country-specific risks. Thus, investors require complex financial instruments to hedge these risks, known as Derivatives. Ideally, the trade of Derivatives should take place in an organised Exchange, which does not yet exist in Morocco. The success of a Derivatives Exchange is conditioned by the financial landscape of the country, the financial markets regulations, and the Exchange’s microstructure. This research study explores some of the key elements required to establish such an Exchange while using two methods. Firstly, a comparative analysis is developed whereby Morocco is benchmarked with countries of similar economical and strategic conditions that already have established Exchanges. The results provide lessons for the development of a Derivatives Exchange. Secondly, a survey among major financial institutions and industrial companies is carried out indicating the need of flexible regulations and desired design of financial Derivatives. Our conclusions compare the results from the two methods and provide recommendations for the market-demand and appropriate microstructure of a Derivatives Exchange in Morocco.