The chief executive of the Iraq Stock Exchange (ISX) believes secondary listings for local companies on bourses in London and New York would eventually attract extra liquidity and boost trade.
"That is the long-term strategy," said Taha Abdulsalam, the chief of the bourse in Baghdad. "It's not going to happen overnight, but the plan is to aim to develop the same standard of bourses and companies outside."
Mr Abdulsalam said that Iraqi companies needed to improve their disclosures, and the timing of them, along with the level of corporate governance. They must also ensure controls are implemented for insiders. Companies have already adopted the International Financial Reporting Standards system, he added.
Listings and prices have grown dramatically on Iraq's stock market since the United States invaded the country in 2003 and the previously state-dominated economy opened up to private investments.
Until last October, the ISX had benefited from seven years of consistent gains as foreign investors and hedge funds bought up shares with the expectation that the oil-producing state would enjoy an economic boom. But the index has shed 21 per cent of its gains since then amid political volatility after the withdrawal of US troops in December, with daily traded value at US$2 million (Dh7.3m).
Mr Abdulsalam said the market had the potential to grow once Iraq eased its reliance on the oil sector for growth.
"Iraq's stock market has the potential to grow to the size of Saudi Arabia, it has the oil, a huge population and very diversified sectors," said Anastasios Dalgiannakis, the head of institutional trading at Mubasher Financial Services in Dubai, which last year signed an agreement to offer live prices for the exchange.
"But many investors are waiting for a foreign custodian to operate in Iraq," Mr Dalgiannakis said. "Investors are willing to take the risk and invest in Iraq, but not take additional counter-party risk."
In March, the ISX mandated that any bank, foreign or local, could apply to a custodian of investor assets. The exchange is in talks with two international investment banks, and expects a resolution in the next four months, Mr Abdulsalam said. He declined to name the banks.
If the main telecommunications companies listed on the exchange, he said, the market's capitalisation would double overnight from its current level of $4 billion. Three mobile companies now operate in Iraq: AsiaCell, in which Qatar Telecommunications has a 30 per cent stake; Korek, in which France Telecom and the Kuwaiti logistics group Agility have a 44 per cent stake; and the Kuwaiti telecoms group Zain.
Mobile operators in Iraq have been under pressure from the government to list their shares under the terms of the licence bought in 2007.
"Until now, they have not given any request to list on the stock exchange," Mr Abdulsalam said.