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Links between securities settlement systems: An oligopoly theoretic approach

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  • Kauko, Karlo

    ()
    (Bank of Finland Research)

Abstract

This paper presents a duopoly model of the securities settlement industry. Because pooling a large amount of payments can help in using liquidity efficiently, issuers prefer systems where a large number of securities are issued. If the central securities depositories establish a mutual link that enables investors to make transactions with foreign securities, cost savings can be achieved. However, these links may have unexpected effects on CSDs’ pricing, and the issuers’ share of the fee burden can increase substantially. It is not advisable to ban additional fees for using the link, as the CSDs might simply increase the fee for domestic transactions.

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File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/0227.pdf
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Bibliographic Info

Paper provided by Bank of Finland in its series Research Discussion Papers with number 27/2002.

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Length: 34 pages
Date of creation: 13 Apr 2002
Date of revision:
Handle: RePEc:hhs:bofrdp:2002_027

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Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.suomenpankki.fi/en/
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Keywords: oligopoly; securities settlement systems;

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References

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  1. Kaushik Mitra & Seppo Honkapohja, 2004. "Performance of Monetary Policy with Internal Central Bank Forecasting," Royal Holloway, University of London: Discussion Papers in Economics 04/18, Department of Economics, Royal Holloway University of London, revised Jul 2004.
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  4. Iftekhar Hasan & Sudipto Sarkar, 2002. "Banks' option to lend, interest rate sensitivity, and credit availability," Review of Derivatives Research, Springer, vol. 5(3), pages 213-250, October.
  5. Hyytinen, Ari & Kuosa, Iikka & Takalo, Tuomas, 2002. "Law of finance: Evidence from Finland," Research Discussion Papers 8/2002, Bank of Finland.
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  9. Hasan, Iftekhar & Malkamäki, Markku & Schmiedel, Heiko, 2002. "Technology, automation, and productivity of stock exchanges: International evidence," Research Discussion Papers 4/2002, Bank of Finland.
  10. Matti Keloharju & Markku Malkamäki & Kjell G. Nyborg & Kristian Rydqvist, 2004. "A descriptive analysis of the Finnish treasury bond market 1991–1999," Finance 0405017, EconWPA.
  11. Välimäki, Tuomas, 2002. "Bidding in fixed rate tenders: theory and experience with the ECB tenders," Research Discussion Papers 1/2002, Bank of Finland.
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Cited by:
  1. 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.

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