Financial Sector Assessment a handbook, Chapter 4 Assessing Financial Structure and Financial Development, imf and World Bank, August 2005

4.4.4
Securities Markets
The sectoral development assessment is to some extent subsumed in International 
Organization of Securities Commissions’s (IOSCO’s) Objectives and Principles of 
Securities Regulation (see box 4.5). Investor protection, fairness, efficiency, and trans-
parency are among the most important prerequisites for the development of organized 
securities markets. These important elements of effective securities regulation are also 
covered in the IOSCO objectives and principles. When investors have confidence, the 
market tends to grow. 
In addition, the assessor needs to verify, by looking at the quantitative measures, that 
the market is, in fact, deep and liquid; that transactions and issuing costs are reasonable; 
and that an adequate range of both debt- and equity-type instruments are available. The 
range of instruments would include some derivatives if this inclusion can be supported by 
the scale of activity and by the technical needs and sophistication of the market partici-
pants. The assessor also needs to look at the degree to which the market can provide new 
funding through public offerings. Benchmarking of the securities markets needs to pay 
attention to some hidden factors. For instance, in addition to market micro-structure and 
market size, the liquidity of the securities markets also depends on the degree to which 
securities are not held in blocks by insiders and, as such, are not normally available for 

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