BAGHDAD — Bas­sam Talal, a wisp of a man with large ears and dole­ful eyes, is in his ele­ment on the floor of the “Iraq Stock Market”:http://www.isx-iq.net/. Every Mon­day and Wednes­day morn­ing, he pirou­ettes between the other 50 or so bro­kers, nip­ping up to the white boards that line the wall of the trad­ing pit. He marks 10,000 shares of Bagh­dad Car­bon­ated Drinks bought for 2 dinars a share (a $13 trade), 5,000 shares of al-Hillal Water Com­pany sold for 2.05 dinar a share (less than $7). He waves col­ored order slips above his head and darts between the white boards and the investors, sep­a­rated from the pit by a waist-high bar­rier. About 200 indi­vid­ual investors eye the Ara­bic scrib­bles of the orders on the wall. Some bring opera glasses. They’re mostly older, heavy­set men in suits, with a few tra­di­tion­ally dressed Bedouin guys hang­ing around. When the see a price they like, they ges­ture to Talal or another bro­ker and point.

All invest­ment comes with risk, but Iraq’s investors face spe­cial — and dead­lier — risks. Bagh­dad is the prize in a civil war that rages even as the Iraq Stock Mar­ket attempts to rebuild itself and Iraq’s shat­tered econ­omy. The fight­ing that often rages out­side the old hotel which houses the bourse is marked by vio­lence that is indis­crim­i­nate and sav­age. In Bagh­dad, car bombs, eth­nic cleans­ing and mas­sacres are the hall­marks of this fight. Located in Hayy al-Awaya, a Chris­t­ian neigh­bor­hood, mas­sive con­crete bar­ri­ers sur­round the entrance to deter car bombs, and grim gun­men care­fully search any­one who gets close.

“Dur­ing the ses­sion, I have about 15 min­utes of watch­ing the prices,” says Taha Ahmed Abdul Salam, the pres­i­dent of the Exchange. “The rest of the time I will be in the street watch­ing my guards who are watch­ing the build­ings. And I have some infor­ma­tion from the police. When I hear some­thing bad, believe me, I will go and search around the build­ing myself.”

He’s con­stantly engaged in a jug­gle of secu­rity and busi­ness. His refusal to halt trad­ing for any­thing is a point of pride for him, a show of defi­ance. On Feb. 22, the day the “Askariya shrine in Samarra was destroyed”:http://www.back-to-iraq.com/archives/2006/02/game_on.php, touch­ing off Iraq’s lat­est round of vio­lence that has yet to sub­side, “I didn’t stop the trad­ing,” he says. “I let the trad­ing go on, and I didn’t men­tion any­thing to anybody.”

The story of the Iraq Stock Exchange has as many ups and downs as a penny stock. It opened in 1992, but Saddam’s gov­ern­ment heav­ily reg­u­lated and manip­u­lated it, and often used it for money laun­der­ing. Prices were only allowed to move 5 per­cent in either direc­tion. By the time U.S. troops bore down on Bagh­dad in April 2003, about 140 com­pa­nies were trad­ing on it and its clien­tele was com­posed of busi­ness­men and wealthy Ba’athists who had socked some cash away. The Amer­i­cans closed the old mar­ket but re-opened it in June 2004 under Coali­tion Pro­vi­sional Author­ity Order No. 74. The new mar­ket has just 15 com­pa­nies, many of the old bro­kers and traded about 500 mil­lion Iraqi dinars a day back then — about $333,000.

Today — from a busi­ness point of view — things aren’t much bet­ter. Though there are 94 com­pa­nies listed, the mar­ket sees only about $1 mil­lion in busi­ness each ses­sion, Salam says. Bank­ing is the largest and most active sec­tor, because they have hold­ings of hard cur­rency and have formed part­ner­ships with for­eign banks like HSBC.

The high-point of the mar­ket, accord­ing to data pro­vided by the eco­nomic sec­tion of the embassy, was around the end of Octo­ber, when the per­ma­nent con­sti­tu­tion was approved. Total mar­ket cap­i­tal­iza­tion surged to almost $2.5 bil­lion, but it’s since plum­meted to $1.25 bil­lion as the polit­i­cal process drags on with no end in sight. (Iraq’s mar­ket is the small­est in the region, with even the Pales­tin­ian stock mar­ket dwarf­ing it at $25 bil­lion — and they don’t even have a real state yet.)

Although it’s legal for for­eign investors to own up to 49 per­cent of an Iraqi com­pany, it’s not yet been imple­mented because of tech­ni­cal hur­dles, which means the flood of for­eign invest­ment pre­dicted when the mar­ket reopened hasn’t hap­pened yet. What local invest­ment there is also side­lined because of a steady exo­dus of wealthy Iraqis and their money to neigh­bor­ing coun­tries dri­ves a vicious cycle of vio­lence, inse­cu­rity and poor eco­nomic per­for­mance that might lessen the violence.

“Peo­ple are wor­ried about their money,” says Talal in a break from trad­ing. “The price drops con­tinue, so peo­ple are try­ing to sell as fast as they can so they don’t lose a lot.”

There is a notional reg­u­la­tory regime with the Iraqi Secu­ri­ties Com­mis­sion, but there Salam and the bro­kers, who own the mar­ket, do the real reg­u­la­tion. They all know one another from the old Saddam-era exchange, which helps pre­vent insur­gents or crim­i­nals from gam­ing the mar­ket. Such famil­iar­ity feels good to Iraqis, but it seems sketchy to west­ern­ers used to more trans­par­ent, rules-based trad­ing rather than a sys­tem run by a bunch of buddies.

But if you talk to June Reed, a senior con­sul­tant for pri­vate sec­tor devel­op­ment at the embassy, things are going pretty well. “This mar­ket has func­tioned very well through sev­eral interim gov­ern­ments,” she said. “Make no mis­take: There is invest­ment in Iraq.”

Reed, a for­mer invest­ment banker from New York for Mer­rill Lynch and Credit Suisse, refused to budged off her cau­tious opti­mism about the mar­ket, stress­ing that great things were in store for the Iraq Stock Mar­ket when a per­ma­nent gov­ern­ment is in place and a planned automa­tion pro­gram is estab­lished. “Here it is truly the poten­tial that is the most impor­tant thing,” she says. But given the archaic, anar­chic and opaque nature of the mar­ket (“It was unusual to see grease boards, hand­writ­ing, etc.,” Reed says) any for­eign investors are rightly wor­ried that they could lose their shirts before they ever know what happened.

In the com­ing weeks, she says, that’s going to change, thanks to a pro­posed auto­mated sys­tem for trad­ing secu­ri­ties that will cre­ate a cen­tral, net­worked elec­tronic depos­i­tory, due to be com­pleted by the end of the year. There will be auto­mated sales, clear­ing and depos­i­tory func­tions like the NASDAQ, she says. “It’s very high tech.” Bro­kers like Talal will be able to respond to orders from his desk at his firm, the Nin­eveh Bro­ker­age, rather than nav­i­gate the IED-peppered streets of Bagh­dad. There are even plans for trad­ing over the Internet.

But as the Amer­i­can mil­i­tary has learned, whiz-bang tech­nol­ogy alone won’t make peo­ple feel safe enough to invest big money into a place like Iraq. The lack of polit­i­cal sta­bil­ity leads to a secu­rity vac­uum, which leads to car bombs, which leads to fur­ther cap­i­tal flight. “The sit­u­a­tion right now in Iraq is not sta­ble. There are many chal­lenges for the stock exchange,” says Salam gloomily. “The investors are all wait­ing for things to hap­pen to the econ­omy, the ser­vices. I believe every­one here is wait­ing for good things to happen.”

[Ed. note: I wrote this for “Fast Company”:http://fastcompany.com/homepage/index.html after I left Bagh­dad, but it was killed because I had the bad luck of fil­ing it the day before the NYT story ran. Such is the jour­nal­ism biz. But bet­ter to blog than to never been seen at all!]