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Interlinking securities settlement systems - a strategic commitment?

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Author Info
Karlo Kauko () (Monetary Policy and Research Department, Bank of Finland, P. O. Box 160, FIN-00101 Helsinki, Finland)
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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Paper provided by European Central Bank in its series Working Paper Series with number 427.

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Length: 38 pages
Date of creation: Jan 2005
Date of revision:
Handle: RePEc:ecb:ecbwps:20050427

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Related research
Keywords: securities settlement systems; central securities depositories; network industries; access pricing;

Find related papers by JEL classification:
G29 - Financial Economics - - Financial Institutions and Services - - - Other
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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. Caillaud, Bernard & Jullien, Bruno, 2001. "Competing cybermediaries," European Economic Review, Elsevier, vol. 45(4-6), pages 797-808, May. [Downloadable!] (restricted)
  2. Claude Crampes & Jean-Jaques Laffont, 2001. "Transport Pricing in the Electricity Industry," Oxford Review of Economic Policy, Oxford University Press, vol. 17(3), pages 313-328.
  3. Armstrong, Mark, 1997. "Competition in Telecommunications," Oxford Review of Economic Policy, Oxford University Press, vol. 13(1), pages 64-82, Spring.
  4. Jean-Jacques Laffont & Jean Tirole, 1994. "Access Pricing and Competition," Working papers 94-31, Massachusetts Institute of Technology (MIT), Department of Economics.
    Other versions:
  5. Barclay, Michael J. & Kandel, Eugene & Marx, Leslie M., 1998. "The Effects of Transaction Costs on Stock Prices and Trading Volume," Journal of Financial Intermediation, Elsevier, vol. 7(2), pages 130-150, April. [Downloadable!] (restricted)
  6. 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!]
  7. Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, 06. [Downloadable!] (restricted)
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  8. Park, Yong-Sam & Ahn, Byong-Hun, 1999. "Joint ownership and interconnection pricing in network industries," International Review of Economics & Finance, Elsevier, vol. 8(2), pages 183-198, June. [Downloadable!] (restricted)
  9. Economides, Nicholas, 1996. "Network externalities, complementarities, and invitations to enter," European Journal of Political Economy, Elsevier, vol. 12(2), pages 211-233, September. [Downloadable!] (restricted)
    Other versions:
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