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Horizontal and vertical integration in securities trading and settlement

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Author Info
Jens Tapking
Jing Yang

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Abstract

This paper addresses a very European issue, the consolidation of securities trading and settlement infrastructures. In a two-country model, we analyse welfare implications of different types of consolidation. We find that horizontal integration of settlement systems is better than vertical integration of exchanges and settlement systems, but vertical integration is still better than no consolidation. These findings have clear policy implications with regard to the highly fragmented European securities infrastructure.

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Paper provided by Bank of England in its series Bank of England working papers with number 245.

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Handle: RePEc:boe:boeewp:245

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  1. Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: II. Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 38-56, Spring. [Downloadable!] (restricted)
  2. Laffont, Jean-Jacques & Tirole, Jean, 1996. "Creating Competition through Interconnection: Theory and Practice," Journal of Regulatory Economics, Springer, vol. 10(3), pages 227-56, November.
  3. Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: I. Overview and Nondiscriminatory Pricing," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 1-37, Spring. [Downloadable!] (restricted)
  4. Carmine di Noia, 1998. "Competition and Integration among Stock Exchanges in Europe: Network Effects, Implicit Mergers and Remote Access," Center for Financial Institutions Working Papers 98-03, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
  5. Thorsten V. Koeppl & Cyril Monnet, 2004. "Guess what: it's the settlements!," Working Paper Series 375, European Central Bank. [Downloadable!]
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  6. Shy, Oz & Tarkka, Juha, 2001. "Stock exchange alliances, access fees and competition," Research Discussion Papers 22/2001, Bank of Finland. [Downloadable!]
  7. Schmiedel, Heiko & Malkamäki, Markku & Tarkka , Juha, 2002. "Economies of scale and technological development in securities depository and settlement systems," Research Discussion Papers 26/2002, Bank of Finland. [Downloadable!]
  8. Holthausen, Cornelia & Tapking, Jens, 2007. "Raising rival's costs in the securities settlement industry," Journal of Financial Intermediation, Elsevier, vol. 16(1), pages 91-116, January. [Downloadable!] (restricted)
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  9. Vickers, John, 1995. "Competition and Regulation in Vertically Related Markets," Review of Economic Studies, Blackwell Publishing, vol. 62(1), pages 1-17, January. [Downloadable!] (restricted)
  10. Kauko, Karlo, 2003. "Interlinking securities settlement systems: A strategic commitment?," Research Discussion Papers 26/2003, Bank of Finland. [Downloadable!]
  11. Economides, Nicholas, 1996. "The economics of networks," International Journal of Industrial Organization, Elsevier, vol. 14(6), pages 673-699, October. [Downloadable!] (restricted)
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  12. Domowitz, Ian, 1995. "Electronic derivatives exchanges: Implicit mergers, network externalities, and standardization," The Quarterly Review of Economics and Finance, Elsevier, vol. 35(2), pages 163-175. [Downloadable!] (restricted)
  13. repec:fth:bfdipa:22/2001 is not listed on IDEAS
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. James T. E. Chapman, 2008. "Policy Coordination in an International Payment System," Working Papers 08-17, Bank of Canada. [Downloadable!]
  2. Thorsten Koeppl & Cyril Monnet, 2005. "Guess what: It's the Settlements!," Working Papers 1051, Queen's University, Department of Economics. [Downloadable!]
    Other versions:
  3. Alexandra Lai & Nikil Chande & Sean O'Connor, 2006. "Credit in a Tiered Payments System," Working Papers 06-36, Bank of Canada. [Downloadable!]
    Other versions:
  4. Jens Tapking, 2007. "Pricing of settlement link services and mergers of central securities depositories," Working Paper Series 710, European Central Bank. [Downloadable!]
  5. Baris Serifsoy & Marco Weiß, 2007. "Settling for Efficiency - A Framework for the European Securities Transactions Industry," Working Paper Series: Finance and Accounting 151, Department of Finance, Goethe University Frankfurt am Main. [Downloadable!]
    Other versions:
  6. Jonathan Chiu & Alexandra Lai, 2007. "Modelling Payments Systems: A Review of the Literature," Working Papers 07-28, Bank of Canada. [Downloadable!]
  7. John P Jackson & Mark J Manning, . "Comparing the pre-settlement risk implications of alternative clearing arrangements," Bank of England working papers 321, Bank of England. [Downloadable!]
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