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Interlinking securities settlement systems: A strategic commitment?

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  • Kauko, Karlo

Abstract

Central securities depositories (CSDs) have opened mutual links, but most of them are seldom used. Why are idle links established? By allowing a foreign CSD to offer services through the link the domestic CSD invites competition. The domestic CSD can determine the cost efficiency of the rival by charging suitable fees, and prevent it from becoming more competitive than the domestic CSD. By inviting the competitor the domestic CSD can commit itself not to charge monopoly fees for secondary market services. This enables the domestic CSD to charge high fees in the primary market without violating investors’ participation constraints.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 31 (2007)
Issue (Month): 10 (October)
Pages: 2962-2977

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Handle: RePEc:eee:jbfina:v:31:y:2007:i:10:p:2962-2977

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Cited by:
  1. Jens Tapking & Jing Yang, 2004. "Horizontal and vertical integration in securities trading and settlement," Bank of England working papers 245, Bank of England.
  2. Mercier, Fabien & Sauer, Stephan, 2013. "Optimal CSD reshaping towards T2S," Working Paper Series, European Central Bank 1549, European Central Bank.
  3. Holthausen, Cornelia & Tapking, Jens, 2007. "Raising rival's costs in the securities settlement industry," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 16(1), pages 91-116, January.
  4. Dominique Chabert & Gisèle Chanel-Reynaud, 2006. "The evolution of central securities depositaries in Europe : stable functions in a changing environment," Revue d'Économie Financière, Programme National Persée, Programme National Persée, vol. 82(1), pages 203-220.
  5. Ende, Bartholomäus & Lutat, Marco, 2010. "Trade-throughs in European cross-traded equities after transaction costs: Empirical evidence for the EURO STOXX 50," CFS Working Paper Series 2010/15, Center for Financial Studies (CFS).
  6. Antoine Martin & James McAndrews, 2008. "A study of competing designs for a liquidity-saving mechanism," Staff Reports, Federal Reserve Bank of New York 336, Federal Reserve Bank of New York.
  7. Dominique Chabert & Gisèle Chanel-Reynaud, 2006. "L’évolution des dépositaires centraux de titres en Europe : des fonctions stables dans un espace mouvant," Revue d'Économie Financière, Programme National Persée, Programme National Persée, vol. 82(1), pages 221-239.
  8. Thorsten Koeppl & Cyril Monnet, 2005. "Guess what: It's the Settlements!," Working Papers, Queen's University, Department of Economics 1051, Queen's University, Department of Economics.
  9. Tapking, Jens, 2007. "Pricing of settlement link services and mergers of central securities depositories," Working Paper Series, European Central Bank 0710, European Central Bank.
  10. Koppl, Thorsten V. & Monnet, Cyril, 2007. "Guess what: It's the settlements! Vertical integration as a barrier to efficient exchange consolidation," Journal of Banking & Finance, Elsevier, Elsevier, vol. 31(10), pages 3013-3033, October.

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