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(In)efficiencies of current financial market infrastructures: an empirical assessment

Author

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  • Basil Guggenheim

    (Swiss National Bank)

  • Sébastien Kraenzlin

    (Swiss National Bank and University of Basel)

  • Christoph Meyer

    (Swiss National Bank)

Abstract

We use unique individual bank-to-bank repo transaction data to empirically assess the efficiency of the existing Swiss financial market infrastructure (FMI) for executing delivery versus payment transactions. This approach enables us to identify its current benefits and drawbacks as well as where new technologies, such as distributed ledger technology, could provide a remedy. We find that the fastest settlement time for repo transactions is 12 s, but that settlements are often delayed by more than 10 min due to the lack of collateral availability. We conclude that the cross-border availability of securities needs to be addressed by either improving interoperability of existing infrastructures or using new technologies.

Suggested Citation

  • Basil Guggenheim & Sébastien Kraenzlin & Christoph Meyer, 2022. "(In)efficiencies of current financial market infrastructures: an empirical assessment," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 158(1), pages 1-11, December.
    • Handle: RePEc:spr:sjecst:v:158:y:2022:i:1:d:10.1186_s41937-022-00098-0
    DOI: 10.1186/s41937-022-00098-0
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    References listed on IDEAS

    as
    1. Kraenzlin, Sébastien & Nellen, Thomas, 2015. "Access policy and money market segmentation," Journal of Monetary Economics, Elsevier, vol. 71(C), pages 1-12.
    2. Raphael Auer & Sebastien Kraenzlin, 2011. "International liquidity provision during the financial crisis: a view from Switzerland," Review, Federal Reserve Bank of St. Louis, vol. 93(Nov), pages 409-418.
    3. Fuhrer, Lucas Marc & Müller, Benjamin & Steiner, Luzian, 2017. "The Liquidity Coverage Ratio and security prices," Journal of Banking & Finance, Elsevier, vol. 75(C), pages 292-311.
    4. Fuhrer, Lucas Marc, 2018. "Liquidity in the repo market," Journal of International Money and Finance, Elsevier, vol. 84(C), pages 1-22.
    5. Sébastien Kraenzlin, 2007. "The characteristics and development of the Swiss franc repurchase agreement market," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 21(2), pages 241-261, June.
    6. Gorton, Gary & Metrick, Andrew, 2012. "Securitized banking and the run on repo," Journal of Financial Economics, Elsevier, vol. 104(3), pages 425-451.
    7. Prof. Dr. Sébastien P. Kraenzlin & Benedikt von Scarpatetti, 2011. "Bargaining Power in the Repo Market," Working Papers 2011-14, Swiss National Bank.
    8. Dr. Basil Guggenheim & Prof. Dr. Sébastien P. Kraenzlin & Dr. Silvio Schumacher, 2011. "Exploring an uncharted market: Evidence on the unsecured Swiss franc money market," Working Papers 2011-05, Swiss National Bank.
    9. Bartolini, Leonardo & Hilton, Spence & McAndrews, James J., 2010. "Settlement delays in the money market," Journal of Banking & Finance, Elsevier, vol. 34(5), pages 934-945, May.
    10. Sébastien Kraenzlin, 2009. "Interest Rate Setting on the Swiss Franc Repo Market," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 145(III), pages 351-377, September.
    Full references (including those not matched with items on IDEAS)

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