The role of stock exchange in Islamic financial system

To transform the interest-based economic system to an Islamic one, a pricing mechanism must be developed to replace riba, and a stock exchange is needed to allocate resources equitably. Stock exchanges serve as financial intermediaries, determine the market value of firms, and offer numerous other services. The stock market must be regulated to prevent problems such as speculation and asymmetric information. The regulations and the attitudes of regulators must be reformed in less-developed capital markets so their stock markets can successfully operate as alternative pricing mechanisms.