We study the determinants of stock market development and the growing migration of capital raising, listing, and trading activity to international exchanges. Economies with better fundamentals – better legal systems, greater macro stability – have larger and more liquid markets. As fundamentals improve, however, the degree of migration to international exchanges also increases. Corporations enjoy lower costs and more liquid shares. Consequently, fully-fledged local stock exchanges become less necessary for many economies. Migration can further lead to such a reduction in domestic activity that would render a local exchange unsustainable. Therefore, the functions and forms of stock exchanges in many economies need rethinking.
