THE SOURCES AND PERSPECTIVES OF THE EXCHANGE - TRADED DERIVATIVES INTRODUCTION ON THE CROATIAN CAPITAL MARKET

The paper examines the attitudes and ratings of investment firms on selected elements of the stock exchange infrastructure that act as a support in the process of establishing the derivatives-exchange market in Republic of Croatia. The main objective of the research is to identify the basic conditions, factors and constraints that determine theability of investment firms in Croatia to actively participate and stimulate the process of introduction of exchange-traded derivatives on the domestic market. This paper also examines the investment firms` attitudes towards the quality of the overall stock exchange infrastructure of our domestic capital market. Since the exchange-traded derivatives are still not listed on our stock exchange, we have also investigated the investment firms` opinions on preferred types of exchange-traded derivatives and their underlyings, in order to achieve liquid and functional derivatives-exchange market. For this purpose, two hypotheses are tested. First hypothesis claims that the Croatian capital market still does not have adequate conditions for the introduction of exchange-traded derivatives on the Zagreb Stock Exchange due to the poor infrastructure of investment companies and the infrastructural underdevelopment of domestic securities market in general. Our second hypothesis claims that in the case of the introduction of the domestic derivatives-exchange market, the development should begin with introduction of simpler instruments and underlyings – namely futures on equity indices and individual stocks that will generate more liquidity compared to exchange-traded derivatives based on other underlyings (such are the derivatives with interest rates and currencies as the underlyings). The results of our study indicate acceptance of both hypotheses. Croatian capital market still lacks adequate preconditions for the introduction of exchange-traded derivatives primarily because of underdeveloped investment firms` infrastructure and because of infrastructural underdevelopment of domestic securities market in general. The study also points to the truth of the second hypothesis. Namely, it argues that the introduction of the derivatives-exchange market should begin with simpler instruments and underlyings such as futures on equity indices and individual stocks. Since the characteristics of our domestic securities exchange can be compared with other stock markets of Southeast Europe, the results of this research may provide a basis for the analysis of investment companies and stock exchanges that operate within other countries in the region. One major advantage of this study is that it provides quality basis and stimulus for future research that could supplement and verify the results of this study by expanding the research to market actors such as the professional investors and small investors.